LDN - Business

Stocks ease ahead of Nvidia reality check, Fed minutes

[February 21, 2024] By Amanda Cooper

LONDON (Reuters) -Global shares edged lower on Wednesday ahead of earnings from Nvidia, which many are anticipating will justify the hype around 2024's AI-driven rally, and of the minutes of the Federal Reserve's January meeting.

In commodities, steps by Chinese authorities to prop up economic growth in the world's largest raw materials consumer have revived doubts about the growth outlook, which weighed on crude oil and iron ore.

Stocks in Europe traded down on the day, as shares in HSBC fell 7% after the region's largest bank reported a record annual profit that missed analyst expectations.

The STOXX 600 was down 0.1%, but within sight of record highs. The MSCI All-World fell 0.1%.

The day's focus will be Nvidia earnings released after the U.S. market close. Nvidia's earnings release and outlook could determine equity sentiment for weeks to come as AI-related stocks have been a strong driver of returns.

Atlanta Fed President Raphael Bostic speaks later on Wednesday, as does Bank of England rate-setter Swati Dhingra.

"An important highlight will be Nvidia's earnings after the U.S. close. Otherwise from central banks, we'll get the FOMC's minutes from the January meeting, and hear from the Fed's Bostic and the BoE's Dhingra," Deutsche Bank strategist Jim Reid said.

Nvidia shares traded 1.6% lower in the premarket on Wednesday. Nasdaq futures fell 0.4%, while futures on the S&P 500 eased 0.24%.

Meanwhile, Chinese blue-chip stocks posted a 1.4% gain on the day, a day after the biggest reduction yet in the nation's benchmark mortgage rate as authorities stepped up efforts to support the property market.

"Regulators are cautious and taking a gradual approach, with the possibility of introducing further measures if needed," said Jian Shi Cortesi, Investment Director, Asia/China Growth Equities of GAM Investments.

"The market sentiment has improved slightly, but the sustainability relies more on improvements in economic activities and corporate earnings."

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Passerbys walk past an electric screen showing Asian markets indices outside a brokerage in Tokyo, Japan, July 1, 2019. REUTERS/Issei Kato/File Photo

DOLLAR BOOST

The dollar edged up against a basket of currencies, rising against the euro, the yen and sterling, which all lost around 0.1% on the day.

The minutes from the Federal Open Market Committee's most recent policy meeting will not capture the latest data on inflation, which has shown enough of an uptick to prompt investors to rethink when U.S. rates might start to fall.

A slim majority of economists polled by Reuters expects the Fed to cut interest rates in June.

Markets expect 92 basis points of cuts from the Fed this year, closer to Fed's own projection of 75 bps of easing and sharply below the 150 bps of cuts priced in by traders at the start of the year.

The changing rates outlook has boosted the dollar and kept the yen, which is extremely sensitive to U.S. rates, near three-month lows.

The yen was at 150.07 per dollar, anchored around the key 150 level for the last few days, which is keeping traders on the watch for intervention from Japanese officials.

In commodities, Brent crude was down 0.6% at $81.88 a barrel, while U.S. crude lost 0.6% to trade at $76.57.

Iron ore futures declined for a third consecutive session on Wednesday to their lowest in nearly four months.

The most-traded May iron ore on China's Dalian Commodity Exchange ended daytime trade 3.98% lower at 893 yuan ($124.29) per metric ton, the lowest close since Oct. 31, after a more than 5% drop the day before.

(Additional reporting by Ankur Banerjee in Singapore and Anisha Sircar in Bangalore; Editing by Shri Navaratnam, Ros Russell and Barbara Lewis)

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