Nvidia’s bumper beat, US inflation keeps Fed hikes alive ahead of Warsh speech

Another quarter, another blowout report for Nvidia

There are plenty of headlines to parse this morning about Nvidia’s recent earnings report, which landed after the cash close yesterday. The Q2 fiscal 2027 release showed revenue more than doubled on a YY basis to US$96.2 billion, versus US$92 billion expected. Data centre revenue also topped forecasts at US$89 billion, up 117% from a year ago. Suffice it to say, it was another blowout report for the major chipmaker.

However, what really caught markets off guard and moved the needle was Nvidia’s CFO, Colette Kress, offering full-year guidance for fiscal 2028 – something the company never does. In the post-earnings call, Kress said she expects revenue to increase by about 70% in fiscal 2028; you may recall that the Street expected about 45%. Despite an initial sell-off in NVDA on margin concerns, Kress’s comments pushed the share price to US$220, up around 5% in after-hours trading.

The read-through into Asia’s regional indices was initially positive overnight, though most of the gains were trimmed into the close. Futures on European and US equity indices are largely mixed this morning, with the former modestly higher and the latter on the back foot.

PCE inflation sticky & growth stalling

Yields are higher across the curve this morning, following the inflation data keeping Fed rate hike bets alive.

As the Fed's most closely watched inflation gauge, the July PCE data released yesterday showed MM and YY headline inflation came in slightly hotter than expected at 0.2% and 3.7%, while core readings reported in line with consensus estimates at 0.2% and 3.3%, respectively. Inflation did not improve or worsen, and with YY headline down from 4.1% in May, it is still moving in the right direction, though it remains almost double the Fed’s 2% target and has done so for five years. 

The issue is that growth in the US is stalling – the second estimate for Q2 26 GDP showed output unchanged at 1.5%, matching consensus estimates, and below the pace seen this time a year ago. So, the Fed is essentially caught between slowing growth and elevated price pressures. And when growth cools, the usual response is to ease policy, but with inflation this high, cutting rates would make inflation even worse. 

Ultimately, despite the recent batch of soft US data for July, this report changed little from a policy perspective, as it is neither too hot to justify immediate tightening nor too soft to loosen policy. Markets, however, have modestly increased their hawkish bets on the back of this, with 9 bps for September, 16 bps for October, and 22 bps implied by year-end. As we have also seen from recent Fed speak, there is a clear division among its ranks. 

Most of the focus will now shift to the annual Jackson Hole conference, which officially begins today, but it is largely all about one man tomorrow: Fed Chairman Kevin Warsh. Whether he gives us anything to work with, however, is unlikely, in my view.

Middle East: Fragile calm in the Strait

Oil prices are subdued this morning, with both WTI and Brent crude hovering just above their 200-day SMAs at US$77.84 and US$82.83, respectively. This is partly due to a mix of vessels transiting the Strait of Hormuz and the interim revenue-sharing agreement between Iran and Oman.

The US has not taken part in these talks, and although strikes between Iran and the US have declined significantly, the conflict is not over. President Trump has recently said the Strait is clear of mines, but the IRGC have denied these claims, saying only Iranian members know their location. As you can see, messages between the two sides remain mixed, and the situation is still uncertain.