Stocks bounce, dollar too as focus turns to Nvidia’s earnings
Updated Updated Tue, 2025 May 27 09:34
* Trump’s hails ‘positive’ step in US-EU trade talks, considers new Russia sanctions
* Global bonds rally as Japan looks to stabilise its debt market
* Tesla shares climb as Mush pledges to be ‘super focused’ on companies
* Dollar gains, yen slips as Japanese government bond yields tumble
FX: USD gained as it made its way back to a key long-term level on the Dollar Index at 99.57. Durable goods declined less than expected, while Consumer Confidence impressed and even printed outside the top end of the forecast range. After Trump’s tariff delay gain, we think it’s likely that dollar upside is limited.
EUR lost ground and traded back towards 1.13. France’s preliminary CPI for May unexpectedly printed a negative m/m read and came in lower-than-expected y/y at 0.7%. We get other countries inflation data later in the week ahead of the region’s figures next week. ECB policymakers remain dovish heading into the June 5 meeting, with markets almost fully pricing a 25bps rate cut.
GBP dipped down to 1.35 on little domestic news. The near-term data release calendar remains limited, while rate expectations are steady, with markets pricing a minimal chance of a 25bpt cut in June and 39bps of easing by December.
USD/JPY was strongly bid as the yen was the major laggard. A sharp fall in domestic long-dated bond yields weighed on reports that Japanese authorities may intervene to stabilise the bond market. That could entail reducing bond issuance after a recent sell-off drove yields to record highs. The MoF will meet with primary dealers on June 20.
AUD fell again with the spike on Monday looking like a firm rejection of higher prices. The aussie is back to the 200-day SMA at 0.6449. CAD bounced for a second day back above 1.38. The loonie’s unusual, negative relationship with risk appetite remains intact, given the broader gains in stocks.
US stocks: US stocks closed in the green. The S&P 500 added 1.9% to settle at 5,913. The Nasdaq closed up 2.14% at 21,414. The Dow Jones finished higher by 1.67% at 42,297. Consumer discretionary, tech and communication services led the gainers, up over 2 to 3%. Every sector was in the green, but defensives did lag, with utilities up 0.77%, energy up 0.84% and consumer staples rising 0.92%. Nvidia rose over 3.2% ahead of its results after the Us close today. The tech megacap plans to launch a cheaper AI chip for China using Blackwell architecture. Tesla European auto sales dropped 49% y/y in April despite a 27.8% rise in battery EV sales overall. But Musk said he would spend more time on his businesses and the stock rose close to 7%. Apple rose 2.5%, clawing back most of Friday’s losses when the stock fell 3% after Trump threatened 25% tariffs on iPhones sold in the US unless the devices were made domestically.
Asian stocks: Futures are positive. Asian markets traded mixed with the US closed for a holiday on Monday. The Hang Seng and Shanghai Composite were subdued with Hong Kong choppy while the mainland had a focus on earnings releases. This came after Monday’s sell-off. Asia tech suppliers to Apple and Samsung stayed under pressure. The Nikkei 225 bumped up into the 200-day SMA at 37,802as yen weakness offset rate hike concerns. The ASX 200 inched modestly higher as mining weakness was offset by strength in tech, financials and energy.
Gold hovered just above $3,300. Gold-backed ETFs registered a fifth weekly outflow last week while leveraged managed money accounts turned net buyers for the first time in ten weeks.
Day Ahead – Australia CPI, RBNZ, Fed Minutes
The monthly Australia CPI indicator for April will be the first partial read of inflation pressure in Q2, ahead of the Q2 CPI release published on 30 July. Economists expect the headline to ease to 2.3% y/y, continuing Australia’s gradual disinflation process. Easter could have seen discounting in clothing and footwear, but higher prices for services and travel. Key will be the indicators of underlying inflation. Recall, the Q1 CPI print showed annual underlying inflation easing back into the RBA’s 2-3% target.
Expectations are for a 25bps RBNZ rate cut, which would take the cash rate to 3.25%. The OCR profile is also predicted to be revised lower. A data dependent stance appears likely, with external developments a key concern. The bank will likely be very open about the latter and how uncertain it is, as Governor Hawkesby and Chief Econ Conway have been saying recently. Activity wise, primary exports look robust but the broader economy, especially services and households, looks soft. The rate-cutting cycle is expected to continue so any change will impact NZD.
The FOMC minutes of the early May meeting are expected to reinforce Chair Powell’s main message that officials will adopt a “wait-and-see” stance as it assesses the trade war and tariff impact on its dual mandate of price stability and full employment.
Chart of the Day –Nvidia bullish consolidation before breakout?
Nvidia earnings are released after the US close today. Q1 EPS is expected at $0.92 with revenue printing at $43.09bn, and next quarter’s revenue is seen at $46.59bn with EPS of $1.01. All eyes will be on commentary around the US tightening of China chip export controls, plus what is said on any continued supply constraints. The options market implies a move in Nvidia’s share price on Thursday of -/+7.8%. That means roughly $146.50 to the topside, and $124.94 on the downside. If a near 8% move is realised, in isolation, it will impact the Nasdaq 100 index by around -/+0.5%.
Of course, the giant chipmaker is part of the “Magnificent Seven” megacaps, whose shares have rebounded sharply since early April after a rough start to the year. Its AI chips have helped propel the company to become one of the world’s largest by market value, worth over $3tn. But after two years of massive gains, the stock’s performance has levelled off so far in 2025.
Prices have been tracking sideways recently which could be bullish consolidation. Upside levels for bulls include $138.90 and $143.44 and support sits at $127.72 and $119.88, with the 200-day SMA at $126.31. Nvidia’s results could also test the stock market rebound, with the S&P 500 not far off record highs after teetering on the brink of a bear market last month.
