US Futures Point to Higher Open
US stock futures rose on Thursday, with S&P 500 and Nasdaq-100 futures up about 0.4%, and Dow Jones futures gaining over 250 points. Revised data showed the US economy grew 3% in Q2, faster than initially thought, easing recession fears from earlier this month. Weekly jobless claims also edged down slightly. Salesforce shares climbed over 4% in premarket trading after beating fiscal second-quarter estimates and raising its full-year profit outlook. Conversely, Nvidia shares fell nearly 4%, a smaller drop than the 8% seen overnight, despite posting strong quarterly results and an optimistic sales outlook.
Dollar Holds Advance Ahead of Key Data
The dollar index traded near 101 on Thursday after gaining half a percent in the previous session, as investors look forward to key US economic data that could guide the outlook for Federal Reserve monetary policy. A second estimate for Q2 GDP and the latest initial jobless claims will be released later today, while the Fed-preferred inflation gauge, the PCE price index report, will follow on Friday. Still, the dollar index hovered close to its lowest levels in 13 months amid expectations that the Fed will start cutting interest rates in September. A chorus of Fed officials signaled imminent rate cuts due to easing inflation and rising labor market risks, with Fed Chair Jerome Powell saying at Jackson Hole last week that the “time has come” to adjust policy restrictiveness. Markets are pricing in about 100 basis points in total easing this year.
Sensex Up for 8th Day to New Peak
The BSE Sensex rose about 1.3% to settle at a fresh record high of 82,134.6 on Thursday, extending its rally into an eight-session, driven by gains in select heavyweights, including auto stocks, financials and IT companies. Tata Motors led with a 4.2% increase ahead of its differential voting right shares suspension at Friday's close, with plans to replace them with ordinary shares. Heavyweight conglomerate Reliance Industries also made a notable contribution, rising 1.5% after announcing a potential bonus share issue at its September 5th board meeting and plans to accelerate AI tool adoption. Bajaj Finance and Bajaj Finserv both rose 2.4% on media news of a likely IPO from Bajaj Housing Finance in early September. Meanwhile, global traders awaited key US economic data, including GDP, PCE prices, and jobless claims, while India's Q2 GDP figures are set for release on Friday.
The FTSE 100 index edged higher on Thursday, reaching a one-month high as investors digested corporate news and Nvidia's earnings, while shifting their focus back to economic data and monetary policy outlook. Construction and material stocks led the gains, while the beverages sector lagged, with Diageo dropping nearly 2% after going ex-dividend. Centrica rose 1.2% after Jefferies upgraded the stock to 'buy' from 'hold,' and Bunzl gained 1% following an RBC rating upgrade to 'sector perform' from 'underperform.' Nvidia reported $30 billion in revenue for the quarter ending July 28, slightly above analysts’ expectations.
The S&P/TSX Composite Index fell by 0.6% to close at 23,127 on Wednesday, amid weaker commodity prices pressuring mining equities, while investors assessed quarterly earnings from major lending institutions. Notable mining stocks, including Agnico (-1%), Barrick Gold (-2.2%), Wheaton Precious Metals (-1.4%), and Franco-Nevada (-1.4%), declined amid softened bullion prices, while a steep drop in copper prices pressured Teck Resources, Ivanhoe Mines, and First Quantum, with losses ranging from 3.3% to 5.6%. Nonetheless, gains in the financial sector helped mitigate the index's decline. The Royal Bank of Canada rose 2.2% after its June-quarter results surpassed expectations, buoyed by lower-than-anticipated provisions for bad loans and the successful integration of HSBC's Canadian operations. Additionally, the National Bank of Canada
Copper futures sank toward $4.1 per pound, retreating sharply from its steady rebound that topped at the over-one-month high of $4.3 on August 27th as the outlook of poor demand returned to investors’ forefront. Ongoing growth concerns for top copper consumer China continued to be magnified by Beijing’s reluctance to fiscally support the country’s struggling manufacturing sector in a movement to allocate public resources toward newer technologies. The downturn in demand was underscored by sharper-than-expected contractions for both the official and Caixin manufacturing PMIs during August, while industrial output growth mixed expectations. Also pressuring demand, Nvidia’s revenue outlook, which is highly dependent on copper-intensive data-center construction, did not match some of the top blowout expectations in the incoming quarters, halting the sharp bets that AI tech will trigger surges in copper prices in coming years.
Silver Rises on Fed Rate Cut Bets
Silver rose to around $29.5 per ounce on Thursday after dropping nearly 3% in the previous session, underpinned by expectations that the US Federal Reserve will start cutting interest rates in September, boosting the outlook for commodities. A chorus of Fed policymakers signaled imminent rate cuts due to easing inflation and rising labor market risks, with Fed Chair Jerome Powell saying at Jackson Hole last week that the “time has come” to adjust policy restrictiveness. Markets are pricing in about 100 basis points in total easing this year. Investors now look ahead to the latest PCE price index report, the Fed’s preferred inflation gauge, to guide the outlook further. Meanwhile, Australian miner BHP Group warned of cooling Chinese demand for metals this year, highlighting the country’s uneven economic recovery.
Gold rose above $2,510 per ounce on Thursday, approaching record highs, as prospects of Federal Reserve interest rate cuts continued to support the metal, while investors awaited new cues on the extent of the reduction. Later today, the second estimate for Q2 GDP and the latest initial jobless claims will be released, with the Fed's preferred inflation measure, the PCE price index report, due on Friday. Traders are currently pricing in a 63.5% chance of a 25 bps cut and a 36.5% chance of a 50 bps reduction in the anticipated September rate cut, as per CME FedWatch Tool. Markets are also anticipating 100 bps in rate cuts for the remainder of the year, which would reduce the opportunity cost of holding non-interest-bearing assets. Elsewhere, official data revealed that China’s net gold imports through Hong Kong increased by 17% in July, marking the first rise since March.
Oil Edges Higher on Ongoing Supply Risks
WTI crude oil futures edged higher to around $74.70 per barrel on Thursday, following two consecutive declines, as concerns over tight supply slightly outweighed demand worries. Libya's eastern government has recently declared force majeure on all oil fields due to political conflict, which, along with rising geopolitical tensions in the Middle East, has raised fears of tightening global supply. However, these were tempered by demand concerns. Leading banks have cut their price forecasts, citing economic troubles in key markets like China and a shift to electric vehicles that is lowering fuel consumption. In Europe, diesel demand is expected to fall below pre-pandemic levels due to sluggish manufacturing and changes in the vehicle fleet. Additionally, the latest EIA report showed a 0.846 million barrel drop in US crude inventories, falling short of the anticipated 3 million barrel draw, contributing to mixed market sentiment.