Morning Bid Americas: As Nvidia awaited, Treasuries absorb new deluge

NetApp

28/08/2024 11:00

A look at the day ahead in U.S. and global markets from Mike
Dolan
    Nvidia's post-bell earnings update on Wednesday is keeping
stock markets everywhere in a holding pattern, while U.S.
Treasury markets appear to be absorbing the latest torrent of
debt sales quite comfortably.
    The wait for the world's most dominant artificial
intelligence chipmaker's earnings has sucked all the oxygen out
of the early part of the week, so large now is the influence of
the $3.1 trillion-valued firm on wider stock indexes.
    Equity options traders are expecting Nvidia's  NVDA.O  
report to spark a more than $300 billion swing in its shares
over the day ahead. Pricing anticipates a stock move of almost
10% on Thursday - larger than the expected move ahead of any
Nvidia report over the last three years.
    The stock gained more than 1% on Tuesday and was marginally
higher in out of hours trading early on Wednesday. S&P500 and
Nasdaq futures  Esc1   NQcv1  held steady.
    The stakes are higher than ever, given the recent creeping
doubts about AI overspend and the lack of end product so far for
the new tech. Apple's planned announcement on Sept. 9 of a new
iPhone with new AI functionality, however, may ease some of
those concerns.
    And it's a big earnings day more broadly for Big Tech - with
Salesforce also reporting and CrowdStrike updating following a
July flub that sparked a worldwide computer outage.
    But while the S&P500  .SPX  has stopped short of new record
highs awaiting the Nvidia results, the market remains buoyant
with the Federal Reserve now finally set to cut interest rates
in three weeks' time.
    Nowhere has that been clearer than in the ease with which
Treasury sold another $69 billion of two-year notes  US2YT=RR 
on Tuesday. Demand was stronger than forecast and, at 3.86%
early on Wednesday, 2-year yields are eyeing 15-month lows.
    Another $70 billion of 5-year paper hits the street later
today, with the total of bills and coupons up for grabs this
week alone surpassing half a trillion dollars.
    Treasury is frontloading the new debt in short maturities
and almost three quarters of that huge total this week is in
bills with tenors of less than 12 months - a move that will see
some benefit to debt servicing costs as Fed rates tumble.
    But the good reception for the new two-year notes and with
one eye on how all those bills eventually get refinanced over
the years ahead, the inverted yield curve between two and 10
years narrowed to just 3 basis points - its smallest in three
weeks.
    The latest U.S. economic releases provide little bar to
those souped-up easing expectations - now running at as much as
104 basis points over the remainder of the year. 
    Although consumer confidence rose to a six-month high in
August, Americans are becoming more anxious about the labor
market - the cooling of which is now front and center of the
Fed's focus.
    And despite multiple supply anxieties from the Middle East
to Libya, oil prices  CLc1  were on the wane again on Wednesday
- and still clocking year-on-year losses of more than 5%.
    The dollar was pretty mixed on all that. Its DXY index
 .DXY  was a touch higher as the euro  EUR=  retreated following
some soft euro zone lending data and expectations that the
European Central Bank will now cut for the second time next
month before the Fed even gets going.
    Dollar/yen  JPY=  was a touch firmer despite relatively
hawkish Bank of Japan comments. BOJ Deputy Governor Ryozo Himino
restated the central bank's intention to continue lifting
interest rates if inflation stayed on course, while closely
monitoring financial market conditions.
    In politics, the latest national opinion polls continue to
show Vice President Kamala Harris marginally ahead of challenger
Donald Trump and she remains favorite to win at bookmakers -
with the latest Reuters/Ipsos poll showing her also ahead on her
economic policy stance.
    Harris and running mate Tim Walz are expected to interview
with CNN TV on Thursday.
    Trump, meantime, faced a revised federal indictment on
Tuesday accusing him of illegally trying to overturn his 2020
election loss, with prosecutors narrowing their approach after a
U.S. Supreme Court ruling that former presidents have broad
immunity from criminal prosecution.
    In Europe, British Prime Minister Keir Starmer warned on
Tuesday of a 'painful' budget ahead and travelled to Berlin on
Wednesday to meet German Chancellor Olaf Scholz.
    Sterling  GBP=  has been buoyed since before Labour's recent
election win in part on expectations the new government will
ease relations with former European Union partners and seek to
soften some of the economically-damaging post-Brexit agreement. 
            
Key developments that should provide more direction to U.S.
markets later on Wednesday: 
* Federal Reserve Board Governor Christopher Waller in India and
Atlanta Fed President Raphael Bostic speaks
* US corporate earnings: Nvidia, Salesforce, CrowdStrike, HP,
NetApp, JM Smucker, Cooper Companies, Bath & Body Works  
* US Treasury sells $70 billion of 5-year notes, sells two-year
FRNs


    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Nvidia - Implied and actual earnings moves    https://reut.rs/3T1HrwP
US job market angst is growing    https://reut.rs/3T6Y3Dv
US mortgage rates retreat    https://reut.rs/3LSib8l
Case Shiller US home prices and mortgage demand    https://reut.rs/4gfGz1J
US 10-year 'term premium' stays negative    https://tmsnrt.rs/3Z2ZeHI
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (By Mike Dolan, editing by Gareth Jones
mike.dolan@thomsonreuters.com)
 ((mike.dolan@thomsonreuters.com  https://reut.rs/3xFdLhlhomsonreuters.com
 mailto:mike.dolan@thomsonreuters.com; +44 207 542 8488; Reuters
Messaging: rm://mike.dolan.reuters.com@thomsonreuters.net/))