Asia stocks up on high hopes for Nvidia, NZ dollar jumps

Asian stock markets experienced gains on Wednesday, driven by high expectations for AI company Nvidia. Investors remained cautious, however, as they monitored the potential impact of interest rate changes in the US and UK. In addition, the Reserve Bank of New Zealand delivered a sobering assessment of inflation, suggesting that rates would need to remain higher for an extended period. As a result, the New Zealand dollar saw a significant increase, reaching a one-month high against the US dollar and a 17-year peak against the yen. The MSCI Asia-Pacific index, excluding Japan, also rose by 0.4%, marking its fourth consecutive week of gains and reaching a two-year high. Chinese blue chips remained relatively stable, just below the seven-month high achieved earlier in the week.
The Nikkei in Japan experienced a slight decline of 0.8% due to data showing that a weak yen was benefiting exports but also causing imported inflation and negatively impacting business sentiment. On the other hand, EUROSTOXX 50 futures and FTSE futures saw a marginal increase of 0.1%. S&P 500 futures and Nasdaq futures remained largely unchanged.

Investors are preparing for potential volatility as Nvidia releases its earnings report, with options indicating a possible swing of 8.7% in either direction, which could translate to a market value of $200 billion.

Analysts are questioning how much more growth Nvidia can achieve, considering the company already boasts a profit margin of 77% and its stock has risen by 93% this year. However, there is a sense of optimism among investors, with JPMorgan analyst Josh Meyers suggesting that management may have some positive surprises up their sleeves.

In terms of central bank developments, investors are closely monitoring any changes in monetary policy and global factors that may impact the markets.
The minutes of the U.S. Federal Reserve’s recent meeting, set to be released later today, are expected to confirm that the next move in interest rates is likely to be a cut. However, policymakers are still waiting for more confidence that inflation is continuing to decline.

According to Fed fund futures, there is a 66% chance of a rate cut by September, and the market has already priced in a total of 43 basis points of easing for this year.

Later in the day, the release of UK inflation figures will be closely watched as they could determine whether the Bank of England will ease monetary policy as early as June or wait until August.

Forecasts suggest that core consumer price inflation in the UK will slow to 3.6% in April, down from 4.2% in March. If the actual figures come in lower than expected, the likelihood of a rate cut in June will increase, putting pressure on the value of the pound.

Currently, the pound is trading just below its two-month high at $1.2712, while the euro is steady at $1.0851, slightly below its recent peak of $1.0895.

The dollar has strengthened slightly against the yen, reaching 156.36, as concerns over potential intervention by the Bank of Japan limit its gains.
Gold prices retreated to $2,413 per ounce, following a brief surge to a record high of $2,449.89 earlier in the week. Concerns over the peak U.S. driving season weighed on oil prices, as demand remained at its lowest level since 2020 and retail prices experienced a four-week decline. Brent crude dropped by 60 cents to $82.28 per barrel, resulting in a further contraction in the spread over futures. Similarly, U.S. crude declined by 63 cents to $78.03 per barrel.