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Nvidia beats after hours pushing US stock futures higher

Vantage Updated Updated Wed, 2024 February 21 10:28

Headlines

* Fed officials expressed caution about lowering rates too quickly

* Gold flat, oil rises, USD unchanged with modest uptick in yields

* Nvidia beats on top line and key data centres results, rises in after hours

* New attempts at Gaza ceasefire are underway

FX: USD printed an inside day, trading mixed against its peers. Bond yields consolidated again just off recent highs. The Fed minutes didn’t rock the boat with officials reiterating their caution over raising rates too quickly.

EUR continued its winning run of positive days amid very low levels of volatility. Some options pricing (risk reversals) is becoming less pessimistic on the single currency. Meanwhile, European stocks neared record highs.  

GBP remained above 1.26 printing an inside day. That denotes consolidation with yesterday’s range entirely inside the prior day. A bigger than expected monthly budget surplus of £23.3bn gives the UK Chancellor a chance to dish out tax sweeteners ahead of an election this year. This fiscal stimulus has probably provided support for sterling.

USD/JPY remained in bullish consolidation mood above 150. The more prices track sideways in a range, the bigger the impending range expansion should be. This is generally in line with the long-term trend. The caveat in USD/JPY is the intervention barrier and previous high at 151.94.

AUD initially outperformed on the lift in China stocks. But the 200-day SMA at 0.6562 again proved resistance. USD/CAD gave back some of yesterday’s gains after the recent lower CPI headline print. Much more data will be required for the BoC to even think about policy easing.

Stocks: US equities closed modestly in the green, marking time ahead of Nvidia’s results after the close. The benchmark S&P 500 closed 0.13% higher at 4981. The Nasdaq 100 settled 0.38% lower at 17,478. The Dow Jones finished 0.13% up at 38,612. AI darling Nvidia jumped after Q4 margins climbed on data revenue growth and favourable component costs. The giant chipmaker said AI demand is hitting a “tipping point” as Q1 guidance beat estimates.

Asian futures are in the green. APAC stocks traded mixed with headwinds from Wall Street. The Hang Seng outperformed driven by strength in tech and property. The mainland saw more stability measures announced by the authorities.

Gold rose for a fifth straight day. Dollar weakness and stuttering bond yields are giving encouragement to the bugs. The precious metal is only down around 1.7% on the year, even with a stronger USD year-to-date, a big rise in Treasury yields and Fed rate cuts being reined in by over 55bps this year. An underlying bid from central banks is evident, plus short covering by speculators near-term.

Day Ahead – PMI Survey Data

We get February PMI data for most major economies released today. These will inform on how economies are faring in the months ahead. Regarding manufacturing, they could show a renewed strengthening. This is because regional PMIs published recently in the US point in that direction, as do indicators from several Asian countries that are normally leading in the manufacturing cycle. On the flip side, the surveys might also point to continued weakness in services which at least in the euro area seem to be stagnating or contracting, albeit with rising prices.

For Eurozone PMIs, expectations are for manufacturing to increase to 47.1 from 46.6 and services to rise to 48.7 from 48.4. The composite is seen ticking up to 48.5 from 47.9. The outlook appears less gloomy, with the January figure hitting 6-month highs while the region avoided recession late last year but still in contraction territory. Indeed, the outlook for Germany, and to a lesser extent France, both look poor and any pick-up in the upcoming data is likely to be marginal, with improvement as the year progresses.

Chart of the Day – EUR/USD trying to break out of bear channel

The world’s most traded currency pair has been enjoying its best run of consecutive daily gains (six) since an eight-day streak back in July. After briefly dropping below 1.07, the major is trying to push out of a longer-term descending channel since the late December high at 1.1139. That is a series of lower lows and lower highs.

The 200-day SMA sits at 1.0826 as initial resistance ahead of a Fib retracement level (38.2%) of the Q4 rally at 1.0875. Support comes in at the midpoint of the autumn move at 1.0793 with the next major Fib level below at 1.0722.