Global stock markets continue to pare their steep August losses, with tech stocks leading the gains, driven by dramatic gains from chip and AI giant Nvidia.
Tech stocks closed sharply higher on Monday and continue to extend their gains today, with European stocks also benefiting from the rally in tech stocks. Nvidia, the leading maker of AI computer chips, rose more than 8% on Monday and is trading nearly 2% higher in pre-market U.S. trading as investors eagerly await Nvidia's earnings report tomorrow.
Our community made a small fortune with Nvidia's massive gains yesterday, and we expect more gains from the only $1 trillion chip company around. With Nvidia's strong pre-market performance, the chip giant is pointing to an opening beyond the all-time high.
Sentiment also improved elsewhere, with the U.K.'s FTSE 100 index ending its longest losing streak since July 2019, while a late surge in Chinese stocks improved sentiment in Asia, ending a 7-day losing streak in Chinese equities. After three weeks of losses, global equity markets extended yesterday's gains.
However, the current gains are mainly due to corrective moves after stocks fell into (short-term) oversold territory, and were boosted by Nvidia's massive gains.
Investment banks expect Nvidia to rise further after tomorrow's earnings report (after market close). We still see two full trading days (today and tomorrow) before the release of Nvidia's earnings report. With a quiet economic calendar today and not too much for US equities tomorrow / very little news on the weak Chinese economy, there is little reason to expect heavy selling in the US tech sector ahead of Nvidia's earnings report.
We remain strongly LONG positioned in Nvidia – even over-positioned – to take full advantage of Nvidia's strong gains.
In FX markets, the offshore yuan stabilized after the People's Bank of China introduced the strongest fix in the currency's history as the central bank continues its fight against yuan selling. Overall, movements in the currency markets are limited. Riskier currencies such as the AUD, NZD and slightly less the GBP are benefiting (temporarily) from the improved risk sentiment. The USD index is flat (0.0%).
Strong gains in the tech sector have weighed somewhat on other assets – including commodities. However, as risk sentiment has improved, industrial metals and oil/natural gas prices are getting a tailwind. Gold remains near the key $1,900 level, with the slight decline in Treasury yields providing some, but likely temporary, support to gold.
👁 ROB'S MARKET OVERVIEW:
August 22, 2023
🇺🇸 US Markets ↗️ (Gains broader than yesterday; tech remains in outperformance).
Cyclical Stocks ↗️
Tech/Growth Stocks ↗️ (Nvidia continues to boost tech stocks, in particular chip & AI stocks)
Financial Stocks ➡️/↗️
Defensive Stocks ➡️/↗️
Energy Stocks ➡️/↗️
Materials Stocks ↗️
AUD ↗️/➡️ (benefits from temporary improved risk sentiment)
GBP, CAD ➡️/↗️
JPY ➡️ (hopes of BoJ intervention will likely fade)
CHF, EUR ➡️/↘️
⚒ Commodity Markets ↕️
Oil prices ➡️/↗️
Natural Gas prices ↕️
Metal prices ↗️
Precious Metal prices ➡️ (hovering near $1,900)
⚡️Cryptos ➡️/↘️ (confidence in cryptos negative after recent losses)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)