Shares rise ahead of Nvidia results; BOJ’s Ueda offers few rate hints

By Investor Empires On Nov 18, 2024

By Ray Wee

SINGAPORE (Reuters) – Global stocks started the week on the right foot ahead of Nvidia’s highly anticipated earnings announcement, while in Japan, a speech by its central bank chief left markets none the wiser about the country’s interest rate outlook.

Bank of Japan Governor Kazuo Ueda confirmed on Monday that the central bank will continue to raise interest rates if economic developments and prices move in line with his expectations, but he did not indicate whether a rate hike in December was possible.

Investors watched his speech closely for clues about an upcoming interest rate hike from the Bank of Japan, which could have been seen as a way to undo the yen’s weakness.

The Japanese currency has fallen by about 7% since October against the rise in the dollar, and fell last week, exceeding the level of 156 against the dollar for the first time since July, which made traders on alert for any intervention from the Japanese authorities.

It was last down 0.3% at 154.72 to the dollar, paring some of the losses incurred as Ueda spoke.

Regarding the possibility of the Bank of Japan raising interest rates next month, Tony Sycamore, a market analyst at IG, said that “it depends on the level of the dollar/yen to some extent.”

“If the dollar/yen goes up at around 160, I think that will increase (the chances of) a rate hike. But I think he might not be happy with the dollar/yen staying at around 150, 152. I think that will probably keep him on the sidelines. Until next year.” .

“It’s coming, it’s just a matter of when…the Japanese economy is in good shape.”

Despite the weak yen, Japan’s Nikkei fell 0.76%, dragged down by a decline in health care stocks.

Meanwhile, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.7%.

Likewise, Nasdaq futures rose 0.6%, while S&P 500 futures rose 0.25%.

The highlight for investors this week will be Nvidia’s third-quarter results on Wednesday, with analysts expecting the leading AI chip company to post a jump in revenue.

Nvidia shares are up nearly 200% this year, with its huge weight in the S&P 500 partly responsible for the index’s surge to record levels this year.

But its strong multi-year run has also raised the bar for earnings outperformance, and a slippage could raise concerns that market hopes for AI have outpaced reality.

Elsewhere, Chinese stocks opened higher on Monday. The blue-chip CSI300 Index rose 1.22%, while the Shanghai Composite Index rose 1.34%.

The Hang Seng Index in Hong Kong rose 1.5%.

Trump and prices

US Treasury yields held near multi-month highs on Monday, supported by bets on less aggressive interest rate cuts from the Federal Reserve in the future. (we/)

The 10-year benchmark yield settled at 4.4315%, while the two-year yield reached 4.2990%.

Futures indicate a 60% probability that the Fed will ease monetary policy by a quarter of a percentage point in December, with only 77 basis points of cuts priced in by late 2025, compared to more than 100 points a few weeks ago.

This came on the back of comments by Chairman Jerome Powell last week that borrowing costs could remain higher for longer, and based on the view that US President-elect Donald Trump’s policies on tariffs, immigration cuts and debt-financed tax cuts will stoke inflation. This limits the scope for further policy facilitation.

“With changes afoot in immigration policy, tariff policy, and fiscal policy, Fed officials will tread more lightly anyway in light of the inflationary impact imposed by these policies and, as a result, the need to keep real interest rates above “Anything else,” said Thierry Wiesmann, global FX and interest rates strategist at Macquarie.

At least seven Fed officials are scheduled to speak this week and traders assume they will sound cautious about aggressive cuts.

The shift in US interest rate and inflation expectations has in turn lifted the dollar, which has reached new highs along with US Treasury yields.

Against a basket of currencies, the US currency hovered near its highest level in a year at 106.66.

In the latest transactions, the pound sterling bought $1.2640, to remain near the lowest level in six months recorded last week, while the euro rose 0.03% to $1.0543.

A crowd of European central bankers is also speaking this week and may sound more pessimistic given recent weak economic data and the risk of Trump’s proposed tariffs impacting EU trade.

In commodities, oil prices rose on Monday. Brent crude futures rose 0.18 percent to $71.17 per barrel, while US crude futures did not change much at $67.05 per barrel. (or)

The spot price of gold jumped 1.24 percent to $2,593.02 per ounce, recovering from its sharp decline last week. (Ghoul/)

(Reporting by Ray Wee, Editing by Jamie Freed)