Japan jumps, but China lags

US stock index futures stormed higher overnight following the release of Nvidia’s quarterly earnings report after last night’s close. The chip designer at the vanguard of the development of Artificial General Intelligence (AGI) delivered a set of exceptional results. The world’s most valuable corporation by market capitalisation easily beat revenue and earnings forecasts.

Source: TN Trader

In addition, its guidance for the current quarter came in far above expectations. There was even more upbeat news when CEO Jensen Huang said that demand for the firm’s Blackwell chips was “Off the charts”. Nvidia’s stock price surged 6% in the immediate aftermath of the update and has held these gains in early trade this morning.

The news has also helped revive confidence in the broader AGI trade, with significant rallies in Advanced Micro Devices, Super Micro Computer, Intel and the Taiwan Semiconductor Manufacturing Company. Palantir also bounced off recent lows following a torrid period for its stock price since the start of this month.

So, Nvidia has sounded the all-clear? Perhaps, but maybe not. Let’s not forget that even after today’s rally, Nvidia is around 8% from its recent high at the beginning of November.

If today’s rally has legs and enough buyers come in to propel Nvidia to fresh all-time highs, then that would be a strong vote of confidence, not just in Nvidia, but the whole AGI trade. But it’s also fair to say that there are growing concerns about the scale of investment in AGI, given the lack of revenues, let alone profits, to date.

Certainly, the cash burn over at ChatGPT owner, OpenAI, is a thing to behold. It projects a spend of $8.5 billion in 2025, and a cumulative cash burn of $115 billion through to 2029. And while there’s little doubt that the ‘picks and shovels’ sellers like Nvidia have significant earnings, the feeling is that many of its customers may not be around in a few years' time.

As with ‘Dot Com’, many AGI-adjacent companies will fail to make it, and will end up going bust, leaving nothing but huge, smouldering craters of debt behind them. That’s not to say that we’re about to see the end of the world as we know it. And the stock market rally may well have further to run. But investors should take care, consider valuations and be far more discerning than they have been to date.

Yesterday evening saw the release of minutes from the Fed’s last FOMC meeting at the end of October. The key takeaway was that they showed disagreement amongst committee members over whether inflation or the labour market should be their biggest concern.

The news saw the probability of a December rate cut fall again. According to the CME’s FedWatch Tool, there’s now just a 34% chance of a 25-basis point reduction next month, down from over 95% ahead of the October meeting.

There’s plenty to watch out for today. There’s a clutch of Fed members due to speak, and retail giant Walmart delivers its earnings report. Those retailers that have reported so far have warned of weak consumer spending.

Finally, there’s an update on Non-Farm Payrolls. Today’s report will cover the month of September. October’s numbers will be rolled up with November’s and released in early December.

European stock indices were firmer across the board this morning as investors responded to US chip designer Nvidia’s blowout numbers after last night's close. Not only did the company significantly exceed expectations on revenues and earnings per share, but it also gave a stronger-than-anticipated forecast for the current quarter as well. CEO Jensen Huang said that demand for the firm’s Blackwell chips was “Off the charts”.

He also addressed concerns over the outlook for the Artificial General Intelligence (AGI) trade, assuring investors that chip demand was coming from many different areas and wasn’t just coming from hyperscalers alone. This bullish report has helped to steady the AGI ship, which had started to list badly since the beginning of this month.

There were gains across the international semiconductor sector, including the Netherlands’ BE Semiconductor Industries and ASM International, while ASML, which makes the precision machines required to tool microchips, was also in demand.

Source: TN Trader

Forex markets were relatively quiet overnight, with no deviation from recent trends. The US dollar was a touch firmer overall. The Dollar Index tested resistance at 100.00 for a second day in a row. This has proved to be a significant barrier to further gains, having held in May, August and several times so far this month.

The dollar has benefited recently from the Federal Reserve’s pivot away from further monetary easing this year. There was additional evidence of this change in attitude following last night’s release of minutes from the October FOMC meeting. Members were split over whether inflation or a weakening labour market was the biggest threat to the US economy.

Those concerned that inflation remains too high, and that it could even start to turn up again, favour keeping rates unchanged for now. But others are worried about a deteriorating labour market, something that was brought into sharp relief by two payroll reports over the summer. In that regard, today sees the release of September’s Non-Farm Payrolls. This has been delayed for six weeks now due to the US government shutdown.

The Japanese yen continues to weaken. The USD/JPY drifted up towards 158.00 overnight, with the yen hitting its lowest level against the dollar since mid-January. This weakness comes despite expectations that the Bank of Japan will raise rates once again at next month’s monetary policy meeting.

Source: TN Trader

The yen continues to come under repeated selling pressure as the government, under new Prime Minister Sanae Takaichi, prepares to unleash a large fiscal stimulus programme. But analysts warn that the weaker yen will stoke inflation as imports become more expensive.

Gold appears to be running into resistance around $4,100 per ounce. Upside momentum has fallen off to some extent, and traders don’t seem to have much bullish commitment, particularly as the US dollar has strengthened recently. It’s now a question of watching how it behaves around key levels.

In the short-term, it’s all about the nice round numbers. There’s some initial resistance around $4,100, followed by $4,200. Support comes in around $4,000. But a prolonged break below here could see a retest of recent lows around $3,900. For now, it’s a bit of a waiting game.

Source: TN Trader

Silver began this week on the back foot. But it found some support around $49.50, and this helped to trigger a rally which sent prices back up towards $52.50 yesterday morning. This took it within striking distance of its all-time high of $54.60 from mid-October. But prices suddenly reversed sharply, taking silver back down into negative territory as European markets closed.

It did manage a bit of a recovery from there, but prices have pulled back again this morning. Overall, it’s in a similar situation to gold. The bears point to what looks like a double top on the charts, which suggests further weakness.

The bulls emphasise the daily MACD, which, while it has flattened out a touch over the past week, still has upside potential. So, it’s all about price levels. Initial support comes in around $49.50, with resistance at $52.50.

Source: TN Trader

Oil continues to be rangebound. Prices sold off sharply early yesterday afternoon in a move which saw front-month WTI drop from $60.50 to below $59 per barrel. The pullback followed reports that the US and Russia were in bilateral talks, with the former presenting a plan to end the war between Russia and Ukraine, which followed the Russian invasion in early 2022.

Source: TN Trader

But prices found a floor and then rallied as buyers stepped back in. There was then an acceleration to the upside following the latest weekly US inventory update from the Energy Information Administration (EIA). This showed a larger-than-expected drawdown in US crude inventories. The rally appears to have stalled below $60 per barrel, leaving prices rangebound and directionless for now.

Gas prices edged lower, giving back some gains after a strong performance yesterday. The market remains sensitive to weekly data releases, and today’s storage report may offer some direction. For now, the pullback is modest, with gas within sight of recent eight-month highs.

Crypto markets saw some gains on the improving risk backdrop, but the move looks far from convincing. Bitcoin’s uptick comes against a broader backdrop of cautious sentiment, with traders not fully leaning into the rebound despite the positive ‘risk-on’ tone from Nvidia’s results.

Ether has found support recently around $3,000. But the overall structure still looks quite fragile, and the market still appears hesitant to commit to a more meaningful shift in direction.

Volatility eased modestly, with the VIX down around 2% this morning, but it remains elevated, in a reminder that underlying market nerves haven’t fully settled. Even with Nvidia’s impressive results lifting sentiment, the elevated VIX suggests investors are still guarding against further shocks. Markets appear more relaxed than earlier in the week, but not enough to signal a return to the low-volatility backdrop seen recently.

Nvidia’s results provided the spark that bulls were looking for, and the movement across US stock index futures suggests markets are back on firmer ground. Whether the move extends will depend on how investors interpret today's jobs data, despite its backward-looking nature.

The dollar continues to firm, while cryptos are attempting to stabilise after recent weakness. Sentiment has clearly improved; the question now is whether it can hold.