A look at the day ahead in U.S. and global markets from Mike Dolan
While the inflation and interest rate world continues to throw up unpleasant surprises, it's hard to imagine much of a shift in major indexes on Wednesday as Nvidia (NASDAQ:NVDA)'s earnings drum roll builds through the session before a post-bell release.
While it's slightly alarming to have just one firm hold an entire stock market in thrall, the sheer weight of Nvidia in indexes after another near doubling of its share price this year underlines both its own importance as well as that of artificial intelligence narrative at large.
Nvidia's stock now has a weighting of over 5% in the S&P 500, accounting for 6.5% of the Nasdaq 100 and 20% of the VanEck Semiconductor exchange trade fund.
Standing away from the AI torchbearer, the macro backdrop has been less benign over the past 24 hours - even if differing inflation pictures are emerging internationally.
Canada's ongoing disinflation surprised positively on Tuesday and spurred June interest rate cut hopes there. But plunging British headline inflation missed forecasts and seemed to put the kibosh on market speculation about a Bank of England move next month.
The Reserve Bank of New Zealand held its policy rates, meantime, and gave some hawkish signals about potentially rising 'peak' rates.
With the Federal Reserve set the publish minutes of its latest policy meeting later on Wednesday, the latest soundings from Fed officials this week seem to throw cold water over any remaining talk of a U.S. rate cut this summer.
On Tuesday, Fed governor Christopher Waller talked of "several more months" of inflation monitoring before being able to act. Cleveland Fed boss Loretta Mester referred to "a few more months".
Boston Fed chief Susan Collins reckoned: "It's going to take longer than I had previously thought."
The upshot is that Fed futures now don't fully price the first quarter-point move until the November 7 meeting - two days after the U.S. election.
Despite a fresh slippage in oil prices, U.S. Treasury yields pushed back higher early on Wednesday - with two-year yields at their highest in over a week. Wednesday's upcoming 20-year bond auction probably hasn't helped.
But the April UK inflation miss also colored the darker bond mood in Europe.
Even though headline annual consumer price growth of 2.3% is almost a full percentage point below the March reading, and now as close to the BoE's 2% target as makes no difference, it was heavily influenced by big drop in household energy tariffs and above the 2.1% forecast.
Worriers pointed to much higher services inflation last month. And even though one-off annual price changes there may be another distortion, 'core' UK CPI inflation is still running at 3.9% - even while annual producer output deflation is simultaneously as deep as 1.6%.
The messiness of the overall picture may make the BoE hesitate in easing for a bit longer and money markets effectively wiped out the chances of a June rate cut from 50-50 before the release.
In what looks like a possible overreaction, an August cut is now even seen to be in the balance. UK government bond yields jumped to a three-week high and sterling hit its highest in a month.
Elsewhere in Europe, markets shivered a bit on concerns about an escalating tit-for-tat trade war between China and other western economies.
European automakers fell 1.9% to a more-than-three-month low, with shares of Mercedes-Benz (OTC:MBGAF), BMW (ETR:BMWG) and Volkswagen (ETR:VOWG_p) falling.
China should raise its import tariffs on large gasoline-powered cars to 25%, a government-affiliated auto research body expert told China's Global Times newspaper as the country faces sharply higher U.S. auto import duties and possibly additional duties to enter the EU.
Back on Wall St, stock futures were marginally in the red after notching modest gains on Tuesday. The dollar was firmer. Global stock markets were slightly weaker.
Key diary items that may provide direction to U.S. markets later on Wednesday:
* US April existing home sales
* US corporate earnings: Nvidia, Target, Synopsys (NASDAQ:SNPS), Analog Devices (NASDAQ:ADI), TJX (NYSE:TJX)
* Federal Open Market Committee issues minutes from April 30-May 1 meeting; Chicago Fed President Austan Goolsbee speaks
* US Treasury sells 20-year bonds
(By Mike Dolan, editing by Christina Fincher, mike.dolan@thomsonreuters.com)