Asian shares dropped on Thursday, mirroring the downturn in Wall Street futures, after Nvidia’s earnings report failed to meet the high expectations of bullish investors. Meanwhile, the U.S. dollar held steady, and the Treasury yield curve neared a positive shift for the first time since July 2022.
Market Focus Shifts to Economic Indicators
Investors are now turning their attention to upcoming U.S. weekly jobless claims, which have become increasingly significant due to the Federal Reserve’s focus on the labor market. Additionally, inflation data from Germany and Spain are anticipated as key indicators for potential rate cuts beyond September.
Asian Markets React to Nvidia’s Earnings
The MSCI Asia-Pacific index, excluding Japan, fell by 0.6%, weighed down by tech stocks. Japan’s Nikkei index dipped 0.4%, and South Korea’s market decreased by 0.7%. Nvidia’s third-quarter revenue forecast of $32.5 billion exceeded Wall Street expectations, yet the results did not satisfy the most optimistic investors who had driven a substantial rally in the company’s shares. Nvidia’s stock plummeted 7.6% in after-hours trading, erasing approximately $236 billion from its market value.
As a consequence, Nasdaq futures dropped by 1% in early Asian trading, while S&P 500 futures declined by 0.5%. Nvidia’s primary chip manufacturer, TSMC, saw its shares fall by 2.4%, contributing to a 1.3% decline in Taiwan’s broader market.
Analyst Commentary on Nvidia’s Market Position
“Nvidia, in some ways, has become a victim of its own success, with its share price soaring over 180% this year and earnings surpassing expectations in 14 of the last 15 quarters,” said Tony Sycamore, an analyst at IG. He added, “Whether today’s results mark the end of investors’ strong affinity for the chipmaker remains to be seen. However, the post-earnings reaction suggests it may be an excellent time to consider diversifying investments into other chipmakers.”
China’s Economic Woes Continue
China’s blue-chip stocks fell 0.4% for the fourth consecutive day as lackluster earnings reports from Chinese companies underscored the country’s sluggish economic recovery. UBS reduced its 2024 GDP growth forecast for China from 4.9% to 4.6% on Wednesday. Shares of Chinese battery manufacturer CATL dropped by 2% after two senior Republican lawmakers called for the company to be added to a restricted list due to alleged ties with Beijing’s military.
In contrast, Chinese food delivery giant Meituan experienced a 7% surge in its stock price after reporting a better-than-expected 21% increase in second-quarter revenue.
Geopolitical Developments and Market Stability
U.S. National Security Adviser Jake Sullivan concluded three days of discussions in Beijing, aimed at easing tensions between the two superpowers. Despite these talks, markets remained largely steady in Asia.
In the U.S., Federal Reserve Atlanta President Raphael Bostic suggested on Wednesday that it might soon be time to consider rate cuts, though he emphasized the need for confirmation from upcoming job and inflation reports before making any decisions.
Dollar and Treasury Yields Hold Steady
The U.S. dollar remained stable above its lowest levels in more than a year, weakened by expectations of imminent Fed rate cuts. Futures markets have fully priced in a quarter-point cut next month, with a 35% chance of a half-point reduction. The euro held steady at $1.113, having dropped 0.6% overnight, unable to breach the $1.12 resistance level.
Treasury yields showed mixed results overnight, with the inverted yield curve between two-year and 10-year bonds steepening to just shy of turning positive. This inversion had persisted since July 2022, excluding a brief reversal during the recent market downturn. Two-year yields remained at 3.8692%, down 4 basis points from the previous session, while 10-year yields were virtually unchanged at 3.8368%, just 3 basis points below the two-year yields.
Gold and Oil Prices Edge Higher
Gold prices continued their upward trend, gaining 0.4% to $2,512.89 an ounce, just below its record high of $2,531.6. Meanwhile, oil prices rose slightly after two days of declines, as concerns over demand from China and the U.S. were offset by supply disruptions in Libya. Brent crude futures increased by 0.1% to $78.75 per barrel, while U.S. West Texas Intermediate crude futures climbed 0.2% to $74.69 per barrel.
