Shares rise ahead of Nvidia results, bond yields retreat

By Marc Jones and Koh Gui Qing

NEW YORK/LONDON (Reuters) -The euro clung to a more than two-month low while world stocks rebounded on Wednesday as investors awaited the results of tech darling Nvidia (NASDAQ:) later to see if the sector’s lofty valuations still look justified.

The MSCI All Country stock index jumped 1.08% by 1849 GMT, and U.S. stocks also climbed across the board. The Dow Jones added 0.67%, the gained 1.25% and the jumped 1.83%. [.N]

The euro hovered at $1.0867 against the dollar and a 12-month low against the pound after survey data showed German and euro area business activity slumped in August. [FRX/]

It was the fastest contraction in German business activity in over three years and prompted traders to firm up bets on the European Central Bank (ECB) now pressing pause on what has been a record-breaking run of interest rate hikes.

Lower euro zone government bond yields meant U.S. Treasury yields were also down. Ten-year Treasury yields eased to 4.191%, after touching a 16-year high of 4.36% a session earlier. [US/]

Investors are waiting for Federal Reserve Chairman Jerome Powell to speak at an annual central bank summit in Jackson Hole, Wyoming, on Friday when he might provide more clues about the U.S. rate outlook.

Though Richmond Fed President Thomas Barkin raised expectations that Powell might deliver a hawkish message on Friday given strong U.S. economic data, some investors are still betting on rate cuts next year, which have underpinned gains in stocks.

“We still anticipate (mild) recessions in the US and the UK and sub-par growth in the Eurozone, which ought to add some disinflationary momentum,” analysts at Investec Economics said.

“We envisage the first rate cuts to take place over the first or second quarter of 2024 in the major developed economies.”

The view that borrowing costs may finally be cresting helped lift the European share index as much as 0.39%.

Germany’s 10-year government bond yield, the euro area’s benchmark for borrowing costs, fell to its lowest in almost two weeks at 2.526%. [GVD/EUR]

“Generally the European currencies are underperforming on the back of the weaker PMI data that show that the economies there are continuing to slow,” said MUFG strategist Lee Hardman.

“The market is now starting to question if the ECB will even do one more hike and 2-3 more hikes that were being priced for the Bank of England are now up in the air.”

Traders scaled back their bets on an ECB September hike and now price in a roughly 40% chance of a 25 basis point move compared with more than 50% on Tuesday.

Overnight, Asian markets saw more focus on the weakness in China’s economy and yuan, as well as some gloomy factory readings from Japan, which also left sentiment fragile.

Equity markets were in wait-and-see mode ahead of earnings later from chip giant Nvidia following its frenzied stock price rise this year on the back of the boom in artificial intelligence (AI) as well as U.S. PMIs and revised payrolls data.

Nvidia’s shares hit an all-time high of $481.87 on Wall Street on Tuesday, with options data showing traders are expecting a larger-than-usual swing in shares after the quarterly results which will be published later.

Analysts expect the firm to forecast 110% growth in third-quarter revenue to $12.50 billion. Stuart Humphrey, an analyst at JPMorgan (NYSE:), said some are forecasting $14-15 billion.

“This kind of number feels a touch high to me, but if it sniffs this – one could argue that into this print, it doesn’t matter if demand will eventually decline next year – (it) still will be re-rated higher,” Humphrey said.

SHRINKING FEELING

MSCI’s broadest index of Asia-Pacific shares outside Japan finished up 0.4%, although it was not far from a nine-month trough hit just two sessions ago. also rose 0.5%.

Data there showed factory activity shrank for a third straight month in August, offering the first glimpse into the health of global manufacturing this month. The United States will also report its flash PMI readings on Wednesday, which are likely to show the factory sector remained in contraction.

The benchmark 10-year Japanese government bond yield hit a new 9-1/2-year peak of 0.675% as investors took the Bank of Japan’s decision to refrain from intervening to buy bonds as a green light for further selling.

In China, blue chips failed to hold onto Tuesday’s gains, falling 1.3%, while Hong Kong’s held up better, up 0.3% after a 1% jump.

Iron ore prices rose 5% to a fresh two-year high on Wednesday, and coking coal and coke were up more than 3% in the absence of Chinese government directives to cut steel production.

In currency markets, the U.S. dollar dipped 0.24% after hitting a two-month high of 103.8 against a basket of major currencies.

The yen recovered to 144.69 after hitting a nine-month trough of 145.34 amid talk that Japan will only intervene in the market if the currency plunges past 150 to the dollar.

Oil prices were lower. futures dropped 0.46% to $83.64 per barrel and U.S. West Texas Intermediate crude futures edged down to $79.36, while gold was 1.06% higher at $1,917.3 per ounce.