European markets tread water amid concerns of additional Fed tightening

• Mixed trade in Europe after hawkish Fed minutes.

• UK services PMI decline could help ease inflation concerns.

• Nvidia beat estimates yet again, with the company valuation now topping $2.5 trillion.

A mixed start in Europe has seen markets treading water, as concerns over potential future tightening from the Federal Reserve overshadow yet another impressive showing from Nvidia. While the market responded well to Powell’s tone at the meeting earlier this month, overnight minutes showed that a number of members viewed additional rate hikes as a distinct possibility given elevated inflation and “easy financial conditions”. All eyes turn to the US unemployment claims and PMI surveys later today, with any additional weakness helping to ease rate hike concerns given the raft of weaker economic data released since the FOMC meeting on 1 May.

UK PMI data saw an unexpected rebound in manufacturing, with the sector moving into expansion territory for the first time in almost two-years. Unfortunately, that strength flew in the face of a sharp pullback for UK services growth, driving the composite figure back down to 52.8. Yesterday’s inflation report highlighted curious trend where the entire inflation figure was being driven by the services sector (5.8%), while goods inflation came in at -0.8% for the year. With today’s report showing particular weakness for services sector input prices, bulls can take solace in the disinflationary impact of today’s PMI survey.

Nvidia promise to provide US markets with a welcome boost at the open, with the chip manufacturer set to gain over 6% thanks to yet another blockbuster earnings report after the close yesterday. Despite concerns around potential slowdown in the rapid pace of earnings growth set over the past year, the company once again managed to top the lofty expectations set by markets. This takes the company to an incredible $2.5 trillion market capitalization, topping the value of the entire German DAX. For many, this essentially draws a line under the first quarter earnings season, with 95% of the S&P 500 having now reported. Despite a strong earnings season having helped push the likes of the Dow up to record highs of 40k, this summer could be a difficult one if we are solely focused on the inflation and interest outlook.