US stock futures rebound on Nvidia earnings

Blowout earnings from chipmaker Nvidia helped push US stock futures higher on Thursday, after global markets had fallen in recent days on concerns about the possibility of US government default.

Contracts tracking Wall Street’s benchmark S&P 500 rose 0.6 per cent and those tracking the Nasdaq 100 rose 2 per cent ahead of the New York open, pointing to a rebound after Wednesday’s falls.

Nvidia, whose quarterly earnings on Wednesday far exceeded analyst expectations on the back of soaring demand for chips used in generative artificial intelligence systems, jumped 27 per cent in pre-market trading, while other technology companies also posted gains.

ASML, Europe’s largest tech company, rose 5 per cent and BE Semiconductor added 8 per cent. In Asia, South Korea’s SK Hynix climbed 5.9 per cent.

However, European markets remained in negative territory, with France’s Cac 40 down 0.3 per cent and Germany’s Dax 0.2 per cent lower, after official data showed that the eurozone’s largest economy shrank for the second consecutive quarter at the start of the year.

Traders’ nerves were stretched after Fitch Ratings, the rating agency, signalled it could downgrade the US’s credit rating and put its triple A score on negative watch, due to “increased political partisanship that is hindering reaching a resolution” on the debt ceiling.

Fitch last moved the US to negative watch during debt ceiling negotiations in Washington in October 2013, two days before that year’s so-called X-date, when the government was expected to run out of cash.

“We believe risks have risen that the debt limit will not be raised or suspended before the X-date and consequently that the government could begin to miss payments on some of its obligations,” the rating agency said.

Yields on Treasury bills maturing next month — around the expected date that the government could run out of money — retreated to 5.8 per cent, after hitting 6.06 per cent overnight, their highest point in more than 20 years.

The yield on two-year Treasuries rose 0.08 percentage points to 4.42 per cent, while the yield on 10-year notes was up 0.04 percentage points to 3.76 per cent. The dollar strengthened 0.2 per cent against a basket of six other currencies.

UK gilts fell further, a day after data showed inflation fell to 8.7 per cent in April — a much smaller drop than the Bank of England had forecast.

The yield on two-year gilts was up 0.07 percentage points to 4.44 per cent, while the yield on 10-year gilts rose 0.09 percentage points to 4.3 per cent, nearing its level in October 2022, when the “mini” Budget of then-chancellor Kwasi Kwarteng sent financial markets into a tailspin.

“There is an ongoing fear associated with inflation being out of control in the UK [ . . . ] there has been some concern about the central bank’s ability to address that,” said Joel Kruger, market strategist at LMAX Group.

The Turkish lira slid to 19.925 against the dollar on Thursday, its lowest level on record, as the country’s central bank held interest rates steady at 8.5 per cent ahead of Sunday’s election.

In Asia, Hong Kong’s Hang Seng index shed 1.9 per cent, while Australia’s S&P/ASX 200 fell 1 per cent and China’s benchmark CSI 300 index was down 0.2 per cent. Japan’s Topix fell 0.3 per cent.

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