- Nvidia pulls US indices lower but AI rout limited to Wall Street
- US and Iran make progress in nuclear talks
- But lack of breakthrough keeps gold and oil supported
- Pound skids but later steadies after Labour loses UK by-election
Global equities shrug off Wall Street’s AI jitters
The ‘AI scare trade’ resurfaced on Thursday after Nvidia’s bumper earnings results failed to ease investor concerns about excess valuations, overspending and the potential disruption to other sectors. Nvidia’s stock slumped by 5.5%, dragging both the S&P 500 (-0.5%) and Nasdaq 100 (-1.2%) lower. But the Dow Jones managed to close fractionally higher, pointing to the usual rotation seen of late away from AI-exposed stocks and into more traditional sectors.
Asian and European equities have also been benefiting from the outflow from US tech and AI favourites. But what’s interesting is that non-US companies that stand to gain from the huge investment in AI have seen their shares rise. This suggests that broader fears about AI may be overblown and the sky-high valuations might still be the dominant worry triggering these panic selloffs in the US.
Among the global standouts, Japan’s Nikkei 225 index and the UK’s FTSE 100 have been setting record high after record high. But even they haven’t been able to keep up with South Korea’s KOSPI 200 index, which is up an incredible 54% year-to-date.
Gold and oil unconvinced by US-Iran progress
Yet, Wall Street’s sideways action might be better capturing the current state of things in the markets, amid nervousness over a possible US strike on Iran, doubts about the Fed rate path and the renewed uncertainty over Trump’s tariff policy.
Whilst all of the above pose a two-sided risk to gold, they have at the very least been lending support, even as its push above $5,200 stalls.
In the immediate term, the focus is on the US-Iran negotiations to reach a nuclear deal. A fresh round of talks was held in Geneva yesterday, with both sides claiming progress. Another round of discussions will likely be held within a week, but the lack of any breakthroughs on key issues, especially as Iran is unwilling to talk about its ballistic missile program, is keeping regional anxiety elevated.
Gold is trading marginally lower today around $5,180 but is still headed for weekly gains of about 1.5%. Oil futures, however, are up by around 1%, as they pare some of yesterday’s losses following a see-saw session.
Dollar little changed for the week
After a choppy week, the US dollar looks set to finish almost unchanged when measured against a basket of currencies. With expectations growing that the Fed is unlikely to resume rate cuts before July, the dollar would probably have had a stronger week if it wasn’t for the mess that resulted from the Supreme Court’s decision to annul most of the ‘Liberation Day’ tariffs, prompting Trump to slap new levies.
However, the most likely scenario at this stage is that the existing trade deals agreed between the US and its main partners will remain in place, and the bigger risk is the question mark of whether the federal government will have to refund all those companies that had to pay the higher tariffs that have now been ruled illegal.
But more importantly for Fed policy, the tariff ruling is seen as being positive for the inflation outlook, and the recent hawkish rhetoric coming from Fed officials only appears to have pushed back the timing for additional rate cuts into 2027 rather than be priced out.
Yen’s losses capped by intervention warning
The yen has been the week’s worst performing major currency, with the pound not too far behind. The Japanese currency came under pressure earlier in the week on reports that Prime Minister Takaichi is opposed to the Bank of Japan hiking rates too quickly, but subsequent hawkish remarks from BoJ policymakers helped the yen to recoup some losses.
The hawkish intentions were weakened somewhat today, though, when the Tokyo CPI readings showed that inflation in the capital fell below 2.0% in February for the first time since October 2024. However, fresh intervention warnings by Japan’s finance minister are helping to put a floor to the yen’s slide at around the 156.00 level.
Pound steadies after Labour defeat
The pound also came under selling pressure overnight after the UK’s governing Labour Party lost a by-election in Greater Manchester, coming third behind the Greens and Nigel Farage’s Reform party. With many seeing this by-election as a referendum on Keir Starmer’s premiership, Labour’s embarrassing defeat could spur a fresh bid for a leadership challenge, throwing the government into chaos.
However, the pound has steadied after its initial spike lower and there hasn’t been much reaction in UK gilt yields either, suggesting little panic for now.