Global stock markets started the week positively due to the anticipation surrounding Nvidia's upcoming earnings report. Nvidia's shares have seen a significant increase this year, contributing to the S&P 500's record highs. Investors are eagerly awaiting Nvidia's third-quarter results, which are expected to show a substantial increase in revenue, especially in the artificial intelligence chip sector. However, there are concerns that market enthusiasm for AI may be exceeding reality if Nvidia fails to meet expectations.
In Japan, the Bank of Japan (BOJ) Governor Kazuo Ueda delivered a speech that left investors uncertain about the central bank's interest rate strategy. Ueda reiterated the BOJ's commitment to adjusting rates based on economic and price developments but did not provide specific guidance on potential rate hikes. The Japanese yen has weakened against the dollar, and traders are watching for any intervention from Japanese authorities. The likelihood of a rate hike in December will depend on the dollar-yen exchange rate.
U.S. Treasury yields remained near multi-month highs, supported by expectations of a less aggressive approach to Federal Reserve rate cuts in the future. The benchmark 10-year yield stabilized, while the two-year yield was recorded at a certain level. Futures markets indicate a probability of a quarter-point rate cut by the Fed in December, with a certain number of cuts anticipated by late 2025. This shift in outlook follows comments from Fed Chair Jerome Powell, suggesting that borrowing costs may remain elevated for an extended period. The potential inflationary impact of Trump's proposed policies has raised concerns about inflation, limiting the scope for further monetary easing. The Fed is expected to adopt a cautious stance in light of these developments.
The dollar has strengthened, reaching new highs alongside rising U.S. Treasury yields. The British pound traded near a six-month low, while the euro saw a slight increase. The European Central Bank's officials are expected to have a dovish tone in light of recent economic data and the potential impact of Trump's tariffs on European trade.
In the commodities market, oil prices showed resilience, while gold prices experienced a notable recovery. These fluctuations reflect ongoing market adjustments to the changing economic landscape and investor sentiment. The focus remains on key earnings reports and central bank communications that will shape the financial landscape in the coming weeks.