Nvidia hits the jackpot, as FTSE reaches a new record

Risk sentiment is buoyant on Thursday, with the exception of Brazilian markets, Europe’s main stocks indices are higher, the dollar is lower, and bond markets are clam, with UK Gilts outperforming. The FTSE 100 reached a fresh record high and is now up more than 16% since April’s low. US stock index futures are down slightly on Thursday but have picked up from their lows as risk sentiment gathers momentum.

FTSE 100 surges to record highs, as tariff threats ignored

The FTSE 100 is being led higher by miners, and the materials sector is higher by more than 3% on Thursday. Healthcare stocks are also strong across Europe. This may sound counterintuitive, President Trump has just announced tariffs on copper, and is threatening a 200% levy on pharma imports, so why are these sectors rallying?  The reason is that there has been very little concrete details about how tariffs will be applied, which is why we are seeing these sectors steal the spotlight: investors expect Trump to back-track. Thus, after heavy declines for Brazilian stocks on Wednesday they may also recover later today.

FX market: Dollar fades as tariff threat recedes

A similar theme can be see in the FX space. The south African rand and the Korean won are the best performers across the EM FX space on Thursday, clawing back losses from earlier this week after President Trump announced tariffs on South Africa and South Korea. Thus, we could see the Brazilian real also claw back some of Wednesday’s losses later today.

President Trump’s reciprocal tariff deadline came and went, now the focus has shifted back to AI and tech stocks. Nvidia surged to a fresh record high on Wednesday, and its market cap surged to $4 trillion at one stage, the first company in the world to do so. Of course, AI is a massive theme, but is Nvidia, a chip maker really worth more than the entire market capitalization of the FTSE 100  and the German Dax?

Nvidia: The good news keeps coming

Nvidia does not report earnings until late August, but the market has upgraded its earnings estimates for the company for the second quarter. Analysts now expect revenues of $45.5bn for last quarter, up from $44.06bn in the first three months of the year. There were a couple of drivers for Nvidia’s push back into record high territory on Wednesday: Meta is continuing to spend big on its AI infrastructure build out, which means more sales for Nvidia from one of its biggest customers. Also, Nvidia’s CEO is heading to China this week to launch a new AI chip that is designed especially for the Chinese market. This chip would have to get around US export controls for tech, however, it could be a major new revenue stream for Nvidia if the launch is successful. Reports in the UK press suggest that the chip could come into effect in September, which could lead to a raft of earnings upgrades for later this year and into 2026, which is also good news for the share price.

Growth stocks like Nvidia and other tech stocks are the biggest factor driving US indices this week. Earnings revisions as we lead up to Q2 earnings season and momentum are also powerful drivers. This is helping to keep the main US stock indices buoyant and close to record highs, which is why we expect any weakness in US indices on Thursday to be mild.

FOMC minutes fail to move the dial for rate cut expectations

Last night’s Fed minutes have weighed slightly on sentiment towards US stocks as we move through to Thursday, and US stock index futures are pointing to a mildly lower open. We will be watching to see if Nvidia can continue to extend gains after rising more than 13% in the past month. The Fed minutes suggest that there is a split at the Federal Reserve, with some members concerned about the impact of tariffs on inflation, and others less worried about potential upside risks for CPI. The Fed Fund Futures market is still expecting 2 rate cuts by year end, and expectations for interest rates at the end of this year are little changed at 3.79%.

Ahead today, the focus will be on initial jobless claims in the US, and whether they will trend lower like they did last week, and any news on an EU/US trade agreement.