Markets Dawn Europe: Thu 23 by 7AM UKT (8AM CET)
Brief Podcast 🎙 + Data 📊 + Script 📄
Podcast script: Estimated reading time ⏲ ~4 mins
Good morning,
Wednesday was a risk-off day for developed markets with equities dropping from record highs ahead of a highly awaited earnings report by chip giant Nvidia after the market close. Leading indices on Wall Street and Europe finished lower by 0.25% to 0.5% on average. Basic resources and the Auto sectors pulled the FTSE and CAC indices down by more than 0.5%.
Nvidia shares jumped 6% to more than $1,000 in after-hours trading when it beat quarterly revenue ($26bn, +260% YoY) and earnings ($14.9bn, 7x YoY) estimates, as demand for A.I. chips remains strong. It also beat expected sales for Q2 with a forecast of $28bn. At the close, before reporting, shares were up by 92% YTD and have increased 25-fold in the last five years to become the third-largest US company with a market cap of $2.3tn. It more than doubled its cash dividend and announced a 10-for-1 stock split for June 10th.
Asian markets are trading mixed today with mainland China and Hong Kong stocks down by around 1% while Japan, Singapore, Taiwan and Korea are a touch firmer.
Japanese 10-year government bond yields rose to over 1% for the first time in more than a decade. Crude oil fell 1% yesterday after US inventories rose unexpectedly and is weaker this morning with Brent trading around $81.50. Stock futures in Europe are indicating a firmer opening this morning.
Headlines,
-In politics, Prime Minister Rishi Sunak surprised analysts by calling an early national election for July 4th, when polls indicate a clear advantage for the Labour Party.
-China launched military exercises around Taiwan as a strong punishment for the new leader who assumed only three days ago.
-Goldman Sachs CEO said he expects no interest rate cuts by the Fed this year.
Headline inflation in Britain rose by 2.3% YoY, the lowest level in 3 years and much lower than a month earlier. However, it eased by less than analysts anticipated, leading traders to scale back bets on an imminent policy rate cut. Futures markets are now pricing in a 90% chance of no rate change in June. The core CPI reading also slowed down from March to 3.9% but was above expectations. The RPI reading came in at 3.3%, in line with estimates. Services inflation (5.9%) was much higher than expected (5.5%). The Bank of England forecasts headline inflation to end 2024 at 2.6%. The Gilts curve jumped upwards with 2-year yields adding 14bp to 4.45%, the highest since early May.
Korea’s central bank left its policy rate unchanged today as expected at 3.5% as upside risks to inflation have increased.
In corporate deals, Anglo American rejected yet another improved takeover bid by BHP worth £29.34 per share, an 8.5% premium to yesterday’s close or $50bn of total equity value. Anglo shares ended little changed while BHP is dropping almost 3% today. Anglo agreed to a one-week extension to continue negotiations.
Also, US private equity firm Oaktree Capital took control of the Italian football club Inter Milan after its Chinese owner Suning defaulted on a loan.
Portugal placed 30-year sovereign bonds, rated A3/A-, at 99bp over Bunds or a 3.68% yield. On the corporate front, the notable issuer was Swisscom (Telco) which placed 7.5, 12.5 (at 3.74%) and 20 years senior notes rated A1/A. Other corporates issuing in € include American Tower Corp (REIT/US), Molson Coors (Beer/US), Nexans (Cables/France), Aker (Energy/Norway) and Sagax (Real Estate/Sweden).
Today’s data release highlight will be May’s preliminary PMIs, Mfg and Services, for the US, UK, the €-zone and Japan. Turkey’s central bank will hold its policy meeting with rates expected to remain unchanged at 50%.
Companies reporting today: Intuit, Medtronic, Workday, National Grid, Xiaomi, Lenovo and Meituan.
See you tomorrow.
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