Fresh turbulence hit global stocks on Thursday as a spy scandal threatened to oust chip giant Nvidia’s CEO, while US Treasury yields touched 5% again and the dollar reached a 19-month high on firming US rate rise bets.
There was early cheer for Europe where the comparatively tech-light STOXX 600 hit its first record high since August, but elsewhere the strains were showing.
Asian markets suffered falls overnight after reports that Nvidia’s board had met to decide the fate of long-time leader Jensen Huang sent the company’s shares diving nearly 7% in premarket US trading.
Chinese tech firms that use Nvidia chips for their AI models fell heavily in Hong Kong. Alibaba and Tencent tumbled 6.7% and 2.6% respectively amid concerns that Washington may now curb access to offshore datacentres with the most advanced processors.
Many of the other global market issues were back in play too.
Brent oil had bounced back above $92 a barrel as persistent tensions in the Middle East offset rising regional output, while the dollar was at its highest since last April in the aftermath of US President Donald Trump’s ‘Liberation Day’ tariff announcements.
The US currency has gained almost 1.5% since hot inflation data earlier this week triggered a repricing of expectations for another Federal Reserve rate hike next month.
A week ago, traders saw a one-in-three chance that the US central bank would hold steady. Now they price a 90% chance of a 25-basis-point hike, and ascribe 9.2% odds of a larger 50-basis-point hike, according to the CME Group’s FedWatch tool.
“The Nvidia issue has played its part in creating a risk-off move that is pushing up the dollar,” Societe Generale strategist Kit Juckes said.
“The deep driver though is the big shift in the tone around inflation … The market is now off the fence on the question of whether there is an inflation problem.”
Wall Street worries
That shift was being felt in bonds too. The US 10-year Treasury yield briefly hit 5% again in Europe after US bond markets had been closed on Wednesday.
Momentum was lacklustre though. Germany’s 10-year Bund yield — the benchmark for much of Europe — nudged down to 3.3%, though it was still set for a weekly rise of around 5 basis points.
In contrast to Europe’s record high for stocks, Wall Street
futures were 0.5% weaker amid the furore around Nvidia, a firm
which until recently had been the world’s most valuable company.
A flurry of reports said Nvidia’s boardhad met late
Wednesday to decide whether to oust its long-time CEO Huang
following allegations that he had an affair with a suspected spy
for China. The New York Times has also reported that Huang had
had an affair with a fellow Nvidia executive.
“It looks bad from every single angle,” said Jake
Dollarhide, chief executive officer at Longbow Asset Management
in Tulsa, Oklahoma.
“I believe the board won’t oust him until they have an
all-star, a known entity in the tech sector, to replace him,” he
said. “At the end of the day, let’s not forget that the Nvidia
chip is the centrepiece of the AI story.”
It was not yet clear who might replace Huang as CEO if he
goes. In the meantime, Chinese domestic GPU makers surged on
Thursday as expectations rose that Nvidia’s troubles could help
local chip suppliers win greater market share.
Saxo Bank’s Chief Investment Strategist Charu Chanana said
Nvidia earnings next Tuesday are the next key test.
“Strong results could reaffirm the AI growth story, but may
not fully remove the governance discount,” she said.
Source: Khaleej Times