Modest gains for European stocks this morning, with the FTSE 100 on course for a decent gain of more than 1 per cent for the week, while the DAX is flat. Crude oil (WTI) is firmer for a second day after finding support at $77.60, whilst gold has pulled back a touch in the face of a stronger dollar, but remains above $1,900.
Yesterday saw the rally burn out – megacap tech stocks were down over 2 per cent, with Nvidia (US:NVDA) ending the day flat and AMD (US:AMD) down 7 per cent. This sent the Nasdaq down almost 2 per cent for the session and the S&P 500 1.35 per cent lower to 4,376. The Dow had its worst day since March, sliding 1 per cent, which may say as much about the lack of realised volatility we have had this year as much as anything else. It seems a lot of the positive news we had from NVDA was priced in, which makes sense when you look at the technicals and the massive jump we saw earlier in the year.
Elsewhere, the latest Bank of America Flow Show report notes that tech's ‘Magnificent 7’ stocks are up 93 per cent vs US regional banks down 37 per cent & China real estate bonds down 55 per cent, year to date. NVDA kept the party going but are we now seeing a top? They also note the “insane” central bank liquidity over the last 15 years being the best correlation for tech...draining of excess liquidity likely to be a drain on tech stocks in the second half of this year, rather than AI leading the path higher.
Jackson Hole: the highlight is undoubtedly Federal Reserve chair Powell speaking at 10am US Eastern time. The theme is ‘Structural Shifts in the Global Economy’, so likely more about the long-term effects and goals for monetary policy rather than what’s going to happen next month.
It will be all about deglobalisation and the long road/war ahead. A change is coming. The Brics are inviting new members to create a new axis of influence and perhaps power.
The dollar has indeed resumed its upwards momentum as expected, with DXY futures rallying to a new two-month high. No major move in Treasury yields with the 10-year still under 4.25 per cent, but maybe some safety moves ahead of the Jackson Hole speech – higher for longer messaging expected.
