Strong NVDA report indices afloat hawkish FOMC minutes

Stock indices in the US closed lower, but Nvidia's strong earnings boosted the market. Global markets struggled amid inflation concerns.

The US stock market indices experienced a moderate decline on Wednesday, with the Dow Jones Industrial Average reaching a one-week low. By the end of Wednesday's trading session, the Dow Jones Industrial Average (US30) had dropped by 0.51%, while the S&P 500 Index (US500) was down 0.27%. The NASDAQ Technology Index (US100) also closed in negative territory, falling by 0.18%. The release of "hawkish" minutes from the May 1 FOMC meeting revealed that many officials were skeptical about the effectiveness of current Fed policies in controlling inflation. This uncertainty led to discussions about the possibility of extending the disinflation process, with some officials even considering further policy tightening if inflation risks materialize. However, after the market closed, both the S&P 500 (US500) and NASDAQ (US100) Indexes saw a significant increase following a strong earnings report from Nvidia (NVDA).

Nvidia (NVDA) exceeded Wall Street's expectations on Wednesday, reporting a surge in earnings driven by its dominant position in chip manufacturing. This success has solidified the company's reputation as a leader in the artificial intelligence sector. In response to the positive news, NVDA shares rose by 6% in after-hours trading, reaching $1,006.89. Over the past year, the company's stock has experienced a remarkable 200% increase. Headquartered in Santa Clara, California, Nvidia has established itself as a key player in developing hardware and software solutions for artificial intelligence applications.

Across Europe, equity markets mostly closed lower on Wednesday. Germany's DAX (DE40) fell by 0.25%, France's CAC 40 (FR40) was down 0.61%, Spain's IBEX 35 (ES35) experienced a minor decline of 0.05%, and the UK's FTSE 100 (UK100) closed with a 0.55% drop.

In the UK and Germany, 10-year bond yields reached two-week highs following reports of slower-than-expected consumer price growth in the UK, raising questions about potential interest rate cuts by the Bank of England (BoE). Additionally, Germany's first-quarter wage increases exceeded expectations, prompting the Bundesbank to warn about ongoing price pressures in the services sector.

European Central Bank (ECB) President Lagarde hinted at the possibility of policy adjustments on June 6 if economic data supports the expectation of inflation reaching the 2% target in the medium term. The Eurozone's current inflation rate stands at 2.4%, close to the ECB's target and significantly lower than the 7% rate recorded a year earlier. Recent GDP estimates confirm that the Eurozone has emerged from recession in the first quarter, with the European Commission's forecasts pointing towards a gradual recovery.

On the energy front, WTI crude oil prices dipped below $77 per barrel on Thursday, marking the fourth consecutive session of declines. The drop was attributed to the US Federal Reserve's indication of a potential policy tightening in response to rising inflation, which could impact energy demand in the top oil-consuming nation. Furthermore, EIA data revealed an unexpected increase of 1.825 million barrels in US crude inventories, contradicting market expectations of a decline. Russia's admission of exceeding its OPEC+ oil production quota in April added to the uncertainty in the oil market ahead of the upcoming OPEC+ meeting scheduled for June 1.

Asian markets also experienced losses on Wednesday, with Japan's Nikkei 225 (JP225) down by 0.85%, China's FTSE China A50 (CHA50) decreasing by 0.02%, Hong Kong's Hang Seng (HK50) losing 0.13%, and Australia's ASX 200 (AU200) down by 0.05%. The Hang Seng Index (HK50) approached its lowest level in two weeks amid doubts about China's efforts to stabilize the property market and boost demand. Nvidia's positive earnings results failed to lift sentiment, especially following the US announcement of tariff hikes on Chinese goods, including electric cars, chips, and medical products.

In the banking sector, the Bank of Korea maintained its policy rate at 3.5% for the 11th consecutive meeting, with expectations of a possible rate cut later in the year. Despite a slight decline, the country's inflation rate remains above the Bank's 2% target, while the economy recorded a robust growth of 3.4% in the first quarter of 2024, leading to an upward revision of growth forecasts.

RBNZ Governor Adrian Orr dismissed the likelihood of another interest rate hike in his latest interview, emphasizing the bank's focus on inflation expectations. Meanwhile, an unexpected increase in retail sales in New Zealand reduced the chances of a rate cut following the RBNZ's recent decision and optimistic outlook.

In Singapore, the annual inflation rate held steady at 2.7% in April 2024, slightly above market estimates. This rate, the lowest since September 2021, reflects the country's economic stability amidst global uncertainties.