FTSE 100 Falls as Sticky US Inflation Overshadows Nvidia's Doubled Sales; Nasdaq Soars
Key Takeaways
- •The FTSE 100 posted heavy losses on Thursday as hotter-than-target US inflation data overshadowed Nvidia's earnings beat.
- •The PCE price index, the Federal Reserve's preferred inflation gauge, was running at 3.7 per cent, well above the Fed's 2 per cent target.
- •Fed chair Kevin Warsh could use his speech at the Jackson Hole conference to lay the groundwork for future interest rate hikes.
- •Brent crude fell more than one per cent to below $86 per barrel as Oman and Iran pursued a deal to reopen the Strait of Hormuz, a passage carrying roughly a fifth of the world's oil supply.
- •Nvidia more than doubled second-quarter sales to $96.2bn against expectations of $92.2bn, but its 74 per cent gross margin guidance missed the 75 per cent markets had hoped for, sparking a post-close sell-off.
London's FTSE 100 suffered heavy losses on Thursday, as murky US inflation data overshadowed Nvidia's sales triumph.
While headline inflation fell back, the Federal Reserve's preferred measure — the Personal Consumption Expenditures Price Index (PCE) — is still running hot at 3.7 per cent, well above the Fed's long-standing 2 per cent target.
Investors will be closely watching Jackson Hole as the Federal Reserve's annual conference — a gathering of central bankers and economists in Wyoming that Fed chairs have historically used to signal shifts in policy thinking — gets underway. Fed chair Kevin Warsh could use his speech tomorrow to roll the pitch for future interest rate hikes.
Susannah Streeter, chief investment strategist at Wealth Club, said: “The Footsie may have flirted with fresh closing highs yesterday, but sentiment looks set to become more cautious as investors refocus on worries about inflation proving sticky, huge government debt piles and the prospect of interest rates lingering at elevated levels.”
Oil prices continued to fall amid reports that negotiations over a peace deal and the reopening of the Strait of Hormuz were gaining pace. The strait, through which roughly a fifth of the world's oil supply passes, is among the most closely watched chokepoints in global energy trade. The price of Brent crude — the international benchmark for oil — fell more than one per cent on Thursday morning to below $86 per barrel.
As Oman and Iran pursue a deal to reopen the strait, President Donald Trump told Fox News that the vital shipping passage is already fully functional. “It's a functioning Strait. Yes, every once in a while there'll be a drone or a rocket or something shot, but it is a very functioning Strait,” he said.
In the week's most hotly anticipated trading update, chipmaking giant Nvidia — whose results are watched on Wall Street as a gauge of global AI spending — beat analysts' expectations again. The firm more than doubled its sales in the second quarter to $96.2bn, smashing expectations of $92.2bn.
But investors pounced on its 74 per cent gross margin guidance — lower than the 75 per cent hoped for by markets — triggering a post-close sell-off. US market momentum continued after the earnings boom, with the Nasdaq, the tech-heavy index where Nvidia trades, soaring.
Later developments tracked in the liveblog:
- 14:30 — US markets momentum continues after Nvidia earnings boom
- 13:30 — Stansted Airport owner hit with cyber attack
- 9:20 — Mortgage rate hikes cost London homebuyers £35,000
- 7:40 — Nvidia tops Wall Street forecasts on booming chip demand
- 7:00 — Opening post
Source: City AM FTSE 100 liveblog
