Tech stumbles and safe havens shine

Despite several names in the S&P 500 ending positively on Thursday, the major US benchmark was on the ropes, down 37 points (0.5%) to 6,908. The Nasdaq 100 followed suit, sliding 294 points (1.2%) to 25,034, weighed by Nvidia’s (NVDA) 5.5% drop. However, the Dow Jones managed to cling on to a very modest gain, up by 17 points (0.03%) to 49,499.

NVDA down more than 5.0% on profit taking?

I am not quite sure why the NVDA Stock fell yesterday, despite robust numbers and solid guidance on Wednesday. While the company’s growth story remains unbroken, in my view – the Share price even rose in after-hours trading – yesterday’s dip could simply be a case of sell-the-news profit taking. We’re also trading at range resistance on the daily chart, so that likely aided things.

Overnight, Asia-Pacific equities were mixed, with Japan’s Nikkei 225 catching a bid, up 0.2%, whilst China's CSI 300 slipped 0.34%, and South Korea's Kospi fell 0.6%. Sentiment was clearly echoing a cautious tone amid geopolitical concerns that kept investors on the defensive, ultimately bolstering safe havens.

On that note, US Treasury yields bull-steepened, and the benchmark 10-year yield dipped a toe under 4.00%. As you would expect, Spot Gold ended the day on the front foot, up 0.4% to US$5,185. However, Oil prices continue to consolidate, caught between a rock and a hard place: geopolitical risks are keeping a floor under prices, while crude stockpiles surpass expectations and form a headwind.

GBP under pressure, Japanese inflation cools to 1.8%

In the FX space, the GBP underperformed against G10 peers due to a combination of three factors. First, the by-election defeat did PM Keir Starmer no favours as the Greens seized a Labour stronghold; second, UK consumer confidence fell to -19 in February; third, expectations of a rate cut by the BoE increased. Money markets are pricing in an 82% chance of a rate cut next month (up from 77% a week ago).

For the JPY, although we are pretty much unchanged in the USD/JPY this morning, it is worth noting that the February Tokyo core CPI eased to 1.8%. This was slightly above the 1.7% median estimate but below the 2.0% reading in January and, of course, south of the BoJ’s 2.0% target.

Japan is caught in a policy bind. The BoJ is leaning hawkish: Board member Hajime Takata warned this week of longer-term inflation overshoot risks driven by rising wages and second-round effects, arguing that the moderation in headline CPI reflects temporary policy subsidies rather than a genuine easing of price pressures. Governor Ueda reinforced that stance, telling the Yomiuri Shimbun that both the March and April meetings remain live for a move to 1.0%.

The pushback is coming from the political side. Japanese PM Sanae Takaichi has made no secret of her discomfort with further hikes and has nominated dovish Board members to match. Money market expectations show April's meeting is now a coin toss, but the real question is how much political pressure the BoJ is willing to absorb.

Day ahead

Friday opens with a cautious tone. The Nvidia-led tech sell-off continues to reverberate, geopolitical risks remain elevated, and key US inflation data is due this afternoon (GMT). In the UK, the Labour by-election defeat and a sharply weaker GfK consumer confidence reading form a negative combination for GBP in the near term. Next week's Spring Statement will need to offer something credible on growth to arrest the slide.

• Canadian MM GDP for December at 1:30 pm GMT.
  Expected: 0.1%; Previous: 0.0%.
• US MM PPI inflation data for January at 1:30 pm GMT.
  Expected: 0.3%; Previous: 0.5%.
• US YY PPI inflation data for January at 1:30 pm GMT
  Expected: 2.6%; Previous: 3.0%