Headlines

* Nvidia dumps and pumps after smashing Q2 expectations, guidance a “mixed bag”

* US dollar advances on month-end demand, yen weakness

* Gold slips as markets turn cautious ahead of economic data

* Buffett’s Hathaway hits $1trn market value, first non-tech US company to do so

FX: USD rebounded off the long-term December low at 100.61 that we have previously highlighted. The risk-off mood helped the greenback. Money markets price in just over 100bps of easing of this year which means they are pretty fairly priced for a soft landing with no more inflation bumps. That means the recent negative USD reaction could see a little more upside on any surprise to this positioning.

EUR fell quite sharply on very little news, so driven by the dollar leg. Prices dipped back under the long-term high from December last year at 1.1139. That is a little bit surprising as eurozone and US two-year spread differentials narrowed further, which should typically support the single currency. Focus is on country-wide inflation data today.  

GBP underperformed hitting lows at 1.3167. This comes after recent fresh highs at 1.3266, which cable tapped earlier yesterday.  

USD/JPY saw strength as the yen got sold. That came after BoJ Deputy Governor Himino said overnight financial that capital markets remain unstable, and the BoJ needs to monitor their developments with the utmost vigilance. This means the bank could hold off hiking rates again in the near-term. Prices are consolidating around a long-term retracement level at 144.58.

AUD popped up to a fresh cycle high at 0.6612 before printing a doji candle denoting some indecision. There was potentially better news on inflation, even though the headline printed higher than estimates. USD/CAD rebounded off a retracement level (61.8%) of the 2024 move up at 1.3471.

US Stocks: US markets settled lower with weakness in tech ahead of Nvidia’s results which were released just after the US close. The benchmark S&P 500 settled down 0.60% at 5,592. The tech-heavy Nasdaq 100 finished lower by 1.18% at 19,350. The Dow Jones closed off 0.39% at 41,091. Financials and healthcare were the only sectors in the green, with energy flat.

Asian stock futures are in the red. Asian stocks traded muted on the mixed lead from Wall Street. The ASX 200 fell as energy and telecoms got pressured, with the marginally hotter than expected headline CPI not helping. The Nikkei 225 was relatively contained in tight ranges. The Hang Seng extended losses later in the session with BYD trading lower ahead of earnings. The Shanghai Composite traded in a tight range.

Gold printed a high of $2529, just below the record peak at $2531. But the dollar rebound saw sellers emerge in bullion.

Day Review – Nvidia results

All eyes were on Nvidia as it posted its Q2 results, which were set to be a “reality check” for the AI wave and the wider market. As we said yesterday, the giant chipmaker accounts for more than 6% of the benchmark S&P 500. One investment bank has calculated that its earnings release has a 78% correlation with the broader market direction over the next two weeks.

The world’s second biggest company by market cap beat estimates on revenue, which more than doubled from a year earlier to over $30bn. But gross margins were down from the prior quarter, even though they beat expectations. Also, guidance for Q3 revenue came in below the whisper number. The results saw the stock whiplash, falling over 7% at one point. As a reminder, options markets had priced in a swing of +/- 10% after hours, so the reaction has been relatively tame.

Chart of the Day – S&P 500 could roll over

As we highlighted above, courtesy of research from an investment bank, where Nvidia goes so too goes the benchmark wider market index. That means the blue-chip S&P 500 could rolls over after struggling to push higher up to the record high in July at 5,669. Prices had been hovering just below here and will now look to the Fib retracement level (78.6%) of the August rebound at 5,551 for initial support. Below here is the 50-day SMA at 5,497 and then the next major Fib level (61.8%) at 5,459.