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Morning Bid: Nvidia, Nikkei knocked - China dodges deflation

[March 11, 2024] A look at the day ahead in U.S. and global markets from Mike Dolan

Wall Street's most bizarre reaction to the relatively benign U.S. employment report on Friday was a late selloff in stellar Nvidia - the artificial intelligence poster child that's almost doubled in price again this year.

Although many dismissed Nvidia's late 5% recoil as merely overdue profit taking on its latest near-90% surge so far this year, the stock fell another 1.5% overnight before recovering that ahead of Monday's bell. And the move stopped Nvidia overtaking Apple as the second most valuable company.

And there's an inevitable search for some smoking gun. Chipmakers Broadcom and Marvell Technology also fell on Friday after their quarterly reports failed to impress investors.

Hardly a game changer in itself, but Nvidia has been sued by three authors who said it used their copyrighted books without permission to train its NeMo AI platform.

And in another tech sideswipe on Monday, the European Union's privacy watchdog said the European Commission's use of Microsoft software breached EU privacy rules and the bloc's executive also failed to implement adequate safeguards for personal data transferred to non-EU countries.

Either way, the pullback does come after a wobbly week for the leading "Magnificent Seven" of megacaps - perhaps indicating some feeling that they'd all come a little too far too fast. After hitting record highs earlier in the session, the S&P500 ended down 0.6% on Friday and futures were in the red again early Monday.

The hiccup was hardly a reflection of the February employment report - which was another statement on the rude health of the U.S. economy. New payrolls beat forecasts last month, but the overall labor market cooled with a rise in the jobless rate and ebbing of wage growth.

That nailed in June for a first interest rate cut from the Federal Reserve and saw full-year easing expectations climb to 95 basis points and two-year Treasury yields drop to the lowest in a month.

And that all sets up Tuesday's consumer price report for February as the next key moment in the Fed's assessment of the disinflation path. Headline annual CPI inflation is expected to remain steady at 3.1% - with the "core" rate ebbing to 3.7% from 3.9% the prior month.

By contrast overseas, China's jarring bout of deflation appears to have eased somewhat as weekend data showed annual CPI inflation there for the first time in six months - exceeding forecasts with a 0.7% advance. And yet downward price pressures persisted with a deeper 2.7% annual slump in producer prices.

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The logo of NVIDIA as seen at its corporate headquarters in Santa Clara, California, in May of 2022. Courtesy NVIDIA/Handout via REUTERS/File Photo

How much the Lunar New Year holiday affected the readouts remains to be seen, but China's stock benchmarks advanced 1.2% on Monday nonetheless amid some relief.

China has also asked banks to enhance financing support for state-backed China Vanke and called on creditors to consider private debt maturity extension, in a rare intervention from central government to help an embattled property firm.

In Japan, speculation about a Bank of Japan policy tightening as soon as this month has intensified over the past week and fourth-quarter GDP revisions on Monday saw initial indications of late 2023 recession magiced away.

Although below the latest forecasts, Japan's revised gross domestic product expanded at an annualised clip of 0.4% in the October-December period, better than the initial estimate for a 0.4% contraction.

But with the yen pushing one-month highs again on Monday amid the BOJ concerns, Japan's Nikkei skidded 2% lower - with chip-equipment maker Tokyo Electron losing 3% and chip-testing equipment maker Advantest off almost 5%.

Elsewhere, the dollar was a touch lower.

But bitcoin hit another record high above $71,000, as the surge in the token showed no signs of slowing down. Britain's financial watchdog on Monday became the latest regulator to pave the way for digital asset trading products after saying on Monday it will now permit recognised investment exchanges to launch crypto-backed exchange-traded notes.

Key diary items that may provide direction to U.S. markets later on Monday:

* New York Fed inflation expectations survey, US Feb employment trends

* Eurogroup finance ministers meet in Brussels

* U.S. Treasury auctions $56 billion of 3-year notes, and sells 3- and 6-month bills

* U.S. corp earnings: Oracle

(By Mike Dolan, editing by Nick Macfie mike.dolan@thomsonreuters.com)

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