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Morning Bid: Nvidia gets vertigo, dollar builds steam

[June 21, 2024] A look at the day ahead in U.S. and global markets from Mike Dolan

Nvidia, the Nasdaq and the S&P500 got dizzy at record highs on Thursday as world markets start to take stock of a bumper 2024 as we near the half-year point next week - but with the dollar back on the march regardless.

The latest U.S. economic readouts showing some cooling of activity through May and June, but the trigger for the megacap recoil was less than clear - not least with the Atlanta Federal Reserve's "GDPNow" real-time estimate still showing a brisk 3% growth for the quarter.

The scale of recent tech gains may just have been too fast as midyear accounting prompts a breather - and perhaps investors are now bracing for a bumpier second half into November's U.S. election. Next Thursday's presidential TV debate may sound the klaxon for that.

Either way, Nvidia's 3.5% drop on the day meant it surrendered its brief role as the most valued company to Microsoft again and the tech-heavy Nasdaq ended a seven-day streak of record closing highs.

The wider equity complex was more mixed, however, with the blue-chip Dow Jones gaining 0.7% and the small-cap Russell 2000 flat on the day.

Despite another softening of Treasury yields after misses on housing starts and jobless claims, the dollar continued to build a head of steam.

And greenback gains were pretty broad-based - against the European currencies where central bank rate cuts and easing bets are mounting, but also against Japan's yen and China's yuan in Asia. The DXY index touched its highest in almost two months.

Foreign money is exiting China again - amid rising global trade tensions and little sign of an end to the deepening housing bust there, Chinese stocks and the yuan had another poor end to a dour week.

About 33 billion yuan ($4.54 billion) left the mainland this month via the Northbound leg of the Stock Connect Scheme - following four months of net inflows.

With one eye on the Chinese Communist Party's central committee plenum next month, G7 countries upping pressure on Chinese electric vehicle exports and Beijing considering retaliation, the yuan slipped to its weakest this year on Friday.

China's commerce ministry said on Friday the European Union has continued to escalate trade friction, which "may trigger a trade war."

Japan's yen is weakening rapidly again too - with doubts about the timing of Bank of Japan tightening reinforced by below-forecast inflation numbers that saw consumer price growth excluding energy and fresh food falling to just 2.1% last month.

That has sent dollar/yen back above 159 for the first time since late April, when the BoJ last intervened to cap it, and elicited another series of warnings from Japanese officials.

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The logo of Nvidia Corporation is seen during the annual Computex computer exhibition in Taipei, Taiwan May 30, 2017. REUTERS/Tyrone Siu/File Photo

With the Swiss National Bank's second interest rate cut of the year on Thursday ringing in the background, the dollar climbed against European currencies too.

Sterling fell to its lowest level in over a month even after the Bank of England left its policy rates steady ahead of the July 4 UK election, as bets on an August rate cut there rose when the BoE indicated that its 7-2 policy-maker split in favor of holding the line was "finely balanced".

News of a rebound in British retail sales last month after a weather-related bust in April did little to shift the dial.

And the euro sank back to the lows it hit last week on France's political upheaval, with June business surveys for the euro zone showing a sharper slowdown in activity there than forecast.

The currency bloc's services industry showed signs of weakening while a downturn in manufacturing took a turn for the worse.

Back on Wall Street, equivalent S&P Global surveys for the United States are due out later on Friday.

S&P500 futures were marginally in the red ahead of the bell.

Elsewhere, China imposed countermeasures on Lockheed Martin's relevant entities and senior executives on Friday over the United States' arms sales to Taiwan.

And Britain's financial technology firm Revolut could be valued at north of $40 billion in a share sale, even as it still awaits a UK banking license, according to people familiar with the situation.

Key developments that should provide more direction to U.S. markets later on Friday:

* US Flash June business surveys from S&P Global, May existing home sales; Canada April retail sales

* San Francisco President Federal Reserve President Mary Daly speaks

* German Economy Minister Robert Habeck speaks in Beijing

* ECOFIN meeting of European Union finance ministers in Luxembourg, with European Central Bank Vice President Luis de Guindos attending

* US corporate earnings: Carmax, Factset

(By Mike Dolan, editing by Mark Heinrich mike.dolan@thomsonreuters.com)

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