On Wednesday, global stock markets experienced a downturn, influenced by stronger-than-anticipated inflation figures in Britain, offsetting optimism surrounding the upcoming earnings report of AI giant Nvidia (NASDAQ:NVDA). Additionally, investors remained on edge, awaiting cues from the U.S. Federal Reserve regarding potential interest rate adjustments.
European equities began the day with a 0.3% decline, reversing earlier gains, with the UK’s FTSE 100 leading the regional losses with a 0.6% drop.
In April, inflation in Britain surpassed expectations, with a minimal decline in a key core measure. This outcome triggered a surge in the pound and British government bond yields, while also prompting investors to recalibrate expectations regarding a potential Bank of England interest rate cut in June. Concerns lingered over whether central banks would align their actions with market anticipations for interest rate reductions.
Market sentiment remained on edge as investors eagerly awaited Nvidia’s earnings report, scheduled after market closure. Nvidia’s performance is closely monitored as its chips are considered the benchmark in AI technology, making its results indicative of the broader AI industry’s trajectory, which has fueled investor optimism and contributed to the ongoing bullish trend in U.S. equities.
Anticipation surrounded Nvidia’s earnings, with options pricing indicating a potential swing of 8.7% in either direction, translating to a staggering $200 billion in market value.
Analysts at Deutsche Bank underscored the significance of Nvidia’s earnings, noting its increasing prominence on the macroeconomic calendar, despite the unusual focus on a single company’s results.
S&P 500 futures and Nasdaq futures remained stagnant, while the MSCI world equity index, tracking shares across 47 countries, showed minimal movement.
Earlier in Asia-Pacific markets, shares outside Japan edged up by 0.3%, extending a four-week climb to reach a two-year high.
Central Bank Insights and Currency Movements
Ahead of the release of minutes from the Federal Reserve’s previous meeting, the dollar edged lower. Market participants awaited confirmation of the Fed’s inclination towards potential rate cuts, contingent upon a sustained downtrend in inflation.
The pound strengthened by 0.3% against the dollar to $1.2729, nearing two-month highs, following the release of UK inflation data.
The euro remained stable at $1.0851, slightly below recent peaks.
New Zealand’s central bank issued a cautionary statement regarding inflation concerns, hinting at the necessity for prolonged higher interest rates. Consequently, the kiwi dollar surged by 0.9% to a one-month high against the U.S. dollar and reached 17-year highs against the yen.
Oil Price Fluctuations
Oil prices encountered a third consecutive decline amid expectations that the Federal Reserve might maintain higher U.S. interest rates due to persistent inflation, potentially affecting fuel consumption in the world’s largest oil consumer.
Brent crude futures dropped by 1.3% to $81.76 a barrel, while U.S. West Texas Intermediate crude (WTI) futures slipped by 1.6% to $77.44.
