Nvidia-led energy boost sends major indices to record! | MarketTalk: What’s up today? | Swissquote

We knew that yesterday was going to be a good day – at least for the stock markets, as enthusiasm around Nvidia spilled over global equity markets, with US, European and Japanese stocks hitting ATH.

The cheery mood in the global stock markets was completely decoupled with the gloomy mood in the sovereign space. The US 2 and 10-year yields rose yesterday because some more Federal Reserve (Fed) members warned about cutting the US rates too early and too much. Yesterday’s stronger-than-expected manufacturing and housing data came as further evidence that the US economy doesn’t necessarily need rate cuts in a rush. But the US dollar appetite was nowhere to be found, the dollar index remains offered into the 100-DMA and the EURUSD shortly tested its 50-DMA – near 1.0883 – to the upside yesterday and is trying to clear its 200-DMA sustainably.

In energy, US crude advanced to $79 per barrel yesterday after a lower-than-expected jump in US oil inventories last week, while nat gas futures are having a hard time rebounding after a dip to 1.55.

Watch the full episode to find out more!

0:00 Intro
0:46 Global indices hit record post-Nvidia earnings
2:17 How about Japanese, Chinese chip stocks?
5:52 Murky mood in sovereigns
8:20 Oil pushes higher, nat gas sees limited dip-buying

Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020.

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The AI rally gained further momentum after Nvidia announced blowout quarterly results following Wednesday’s close. That was a major relief for investors – who were of course fearing the slightest misstep from the world’s most important stock! So many major indices across the globe advanced to fresh records despite falling expectations

For this year’s rate reductions and rising yields. Welcome, this is Swissquote’s daily Market Talk! We knew that yesterday was going to be a good day – at least in the stock markets, given that Nvidia defied the expectations that it would – maybe – fail to deliver $20bn sales in the latest quarter.

But they announced a $22bn sales. So I am repeating it, so that we could digest it well before the weekend. And because a potential misstep from Nvidia was seen as a major potential trigger of a downside correction, well, the bulls broke their chains free after the earnings.

The star of the past two years, the most important stock on planet Earth, or the AI revolution’s mascot Nvidia ended up jumping 16% in one session and it stole the title of the biggest one day jump from Meta – which had just obtained it after its latest quarterly report.

Nvidia added $277 billion to its market cap just yesterday. Morgan Stanley raised its price target from $750 to $795, and Bank of America raised its target from $800 to $925. Allez, let’s round it up to $1000 and see if Nvidia could hit that $1000 mark!

Euphoria and fun aside, the expectation that the narrow stock rally, mainly shouldered by tech, would broaden up has dissipated like dust in the sky in the aftermath of the first earnings season of the year. Tech, and everything related to tech is doing just fine. And the others surf on that optimism.

The S&P500 rallied more than 2% and hit a fresh record yesterday and the rally is accelerating above the October 2022 to now ascending range. Nasdaq 100 soared 3% and traded close to an ATH. The Dow Jones industrial index climbed to an ATH as well. Wait, wait I am not finished.

The European Stoxx 600 traded at an ATH – whereas it’s not really tech heavy. And the Japanese Nikkei 225 traded at an ATH as well, after more than 3 decades. What a time to be in stocks! Now, everyone is wondering whether the US stocks haven’t become too expensive – because

The S&P500’s PE ratio is around 23. And in this context, Japanese stocks, which also benefit from the AI boom, and extra-low Japanese rates, and super cheap Japanese yen trade with a PE ratio of only 16. That makes the Japanese stocks a good alternative for investors who want to increase their AI

Exposure and diversify geographically. Nikkei’s two heavy weights: Tokyo Electron – that makes semiconductor manufacturing equipment and Adventest – which builds chip-testing machines are both doing great. Just saying! And oh, there is also the idea that the Chinese chipmakers would be a cheap option to the US and Japanese counterparts.

Yes, the Chinese chipmakers have no option but to fill in the gap from the US export ban. The Chinese companies will be constrained to buy Made-in-China chips, and the Chinese government will put all its weight to make things work – because they can’t afford

To fall behind the biggest technology race of the decade. But investing in China implies taking the Chinese government risk. So you must ask yourself: is growth potential in China is big enough to take that risk. At this point, when the world is rushing to AI, I don’t think that the Chinese demand

Is necessarily needed. Let’s first let Nvidia try to respond to the surging global demand! And speaking of China – real quick – the latest data showed that new home prices dropped the most in 10 months. So the property crisis gives no signs of improving. On the contrary.

Back to our part of the planet, note that the cheery mood in the stock markets was completely decoupled with the gloomy mood in the sovereign space. The US 2 and 10-year yields rose yesterday because some more Fed members warned about cutting the US rates too early and too much.

Yesterday’s stronger-than-expected manufacturing and housing data came as further evidence that the US economy doesn’t necessarily need rate cuts in a rush. But the US dollar appetite was nowhere to be found, the dollar index remains offered into the 100-DMA. The 3-month risk reversals of the USD against EM currencies showed that option traders are

The least bullish on the US dollar against EM currencies since 2007. That’s interesting, because the US economic data continues to surprise to the upside. The Fed rate cut expectations are being scaled back, yet the dollar doesn’t gain the attraction that it deserves.

That’s a good thing, mind you, to prevent the US inflation from spilling to the rest of the world, but it’s not fully rational. Anyway, in Europe, inflation data came as no surprise while the PMI data showed that activity hit an 8-month high in February.

But cracks are widening with German manufacturing falling to the lowest levels since October. Still, the Geman 10-year bund yield rose to 2.50% and the EURUSD shortly tested its 50-DMA – near 1.0883 – yesterday and is trying to clear its 200-DMA sustainably.

The retreat in dovish ECB expectations support the euro’s rebound against the greenback, as the market pricing now suggests less than 100bp cut from the ECB this year. In energy, US crude advanced to $79 per barrel yesterday after a lower-than-expected jump

In US oil inventories last week, while nat gas futures are having hard time rebounding after a dip to 1.55. The European nat gas futures continue to push lower as traders are selling nat gas for next winter – a sign of confidence that Europe will continue to receive the Russian gas shipments

As we near the second anniversary of Russia’s invasion of Ukraine. Europe is not less shocked with the war on its continent but is clearly less capable of putting more restrictions on Russian energy – given the cost-of-living crisis, and Germany’s descent into hell.

Therefore buying defense stocks is a better way to navigate the war in Europe than buying nat gas futures at this point. For nat gas however, I still think that current levels call for a meaningful upside correction. This is all for this week! I am Ipek Ozkardeskaya and thanks for joining me.

I hope this episode of Market Talk has been helpful to you. Please do not hesitate to leave your comments, reactions, and questions below and follow us on Instagram, X and Linkedin for regular market updates and subscribe to our Youtube

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