US stock futures opened higher at the start of Asian trading on Thursday as risk sentiment turned positive following a sharp jump in sales forecasts from Nvidia Corp., the world’s most valuable chipmaker.
The dollar fell versus the yen after Fitch warned it may cut its rating for the US. Fitch placed US ratings on watch negative, reflecting the partisan dispute over the debt ceiling, though the ratings agency still expects a resolution to head off default. Gold also showed a small gain.
Nasdaq 100 futures rallied 1.3%, following a 0.5% drop in the underlying index Wednesday amid concerns over the debt-ceiling impasse in the US and the risk of another rate hike from the Federal Reserve. Contracts for the S&P 500 jumped 0.4%.
Nvidia shares rose by around 25% in after-hours trading following the chipmaker’s report that booming demand for artificial intelligence processors would fuel revenue growth. The after-hours stock action indicated a gain of around $200 billion to its market value.
“The company couldn’t have been more positive about what it’s seeing,” said Adam Crisafulli, analyst and founder of Vital Knowledge media. “In addition to the huge revenue tailwind hitting the company from AI, Nvidia’s gross margins have now largely recovered to prior peak levels.”
Major Asia equity indexes had looked likely to decline on Thursday, with futures lower for Hong Kong, Japan and Australia. There is now a prospect of gains in tech-related stocks in South Korea, Japan and Taiwan.
The yen rose 0.2% versus the dollar on the Fitch news. Most other major currencies held to tight ranges. A gauge of dollar strength was down by less than 0.1%.
Selling in US government debt pushed 10-year Treasury yield five basis points higher on Wednesday to a level not seen since the depths of the banking crisis in March. In addition to the debt talks, investors are weighing minutes from the Fed’s meeting in early May that showed policymakers were split on the path for US interest rates further knocked sentiment.
Yields on short-dated Treasuries pushed higher as investors demanded a higher premium on debt coming due after June 1 — the date Treasury Secretary Janet Yellen has said the US was likely to begin missing debt payments. Those maturing June 6 rose above 6.6% on Wednesday while those maturing May 30 are yielding around 3%.
JPMorgan Chase & Co. Chief Economist Michael Feroli said the odds of US debt talks going past June 1 are 25% and rising. However, Nomura’s Charlie McElligott said he believes a “positive outcome” is getting closer, with traders selling in waves of profit-taking ahead of the Treasury secretary’s deadline.
“Any relief rally on a debt-ceiling ‘deal’ headline into the start of next week then has the potential to act as a local top for stocks for a bit, with most of the ‘wall of worry’ blood already squeezed from the stone,” McElligott said.
In addition to debt-ceiling uncertainty, other economic headwinds stemming from tighter credit conditions are not yet reflected in market prices, according to Kim Strand, senior vice president, Franklin Templeton Investment Solutions.
“Our base case is still a recession,” Strand said in an interview on Bloomberg Television. “The rate hike cycle could be over but there is still a lot left in terms of macro economic uncertainty and how that ripples through the economy.”’
Later in Asia Thursday, the Bank of Korea hands down its latest policy decision Thursday, with economists anticipating the central bank will hold rates for a third consecutive meeting against the backdrop of persistent inflation and slowing growth. Bank Indonesia is also expected to hold rates when it meets.
Key events this week:
- Fed issues minutes of May 2-3 policy meeting, Wednesday
- Bank of England Governor Andrew Bailey speaks, Wednesday
- US initial jobless claims, GDP, Thursday
- Interest rate decisions in Turkey, South Africa, Indonesia, South Korea, Thursday
- Tokyo CPI, Friday
- US consumer income, wholesale inventories, durable goods, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.4% as of 8:11 a.m. Tokyo time. The S&P 500 fell 0.7%
- Nasdaq 100 futures rose 1.3%. The Nasdaq 100 fell 0.5%
- Nikkei 225 futures fell 0.1%
- Australia’s S&P/ASX 200 Index futures fell 0.4%
- Hang Seng Index futures fell 0.1%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0754
- The Japanese yen rose 0.2% to 139.23 per dollar
- The offshore yuan was little changed at 7.0649 per dollar
- The Australian dollar was little changed at $0.6542
Cryptocurrencies
- Bitcoin was little changed at $26,380
- Ether fell 0.1% to $1,802.09
Bonds
- The yield on 10-year Treasuries advanced five basis points to 3.74%
- Australia’s 10-year yield advanced one basis point to 3.66%
Commodities
- West Texas Intermediate crude fell 0.3% to $74.15 a barrel
- Spot gold rose 0.1% to $1,960.04 an ounce
This story was produced with the assistance of Bloomberg Automation.
