29th Aug 2024 16:55
(Alliance News) - Stock prices in Europe closed higher on Thursday, with Germany's DAX 40 hitting its best-ever level, as equities shrugged off an underwhelming response to chipmaker Nvidia's earnings.
US indices were also on the rise, as stronger data supported soft-landing hopes. Focus now turns to Friday's personal consumption expenditures reading, and what it could mean for Federal Reserve cut expectations.
Data from the eurozone, meanwhile, also put the European Central Bank under the spotlight.
The FTSE 100 index closed up 35.79 points, or 0.4%, at 8,379.64. The FTSE 250 fell 35.79 points, or 0.2%, at 21,031.08, and the AIM All-Share rose 2.19 points, or 0.3%, at 772.49.
The Cboe UK 100 ended up 0.5% at 837.89, the Cboe UK 250 fell 0.2% to 18,527.53, and the Cboe Small Companies declined 0.6% to 16,912.82.
In European equities on Thursday, the CAC 40 in Paris was up 0.7%, while the DAX 40 in Frankfurt ended up 0.7% to achieve a new closing high.
In New York, both the Dow Jones Industrial Average and S&P 500 were 0.8% higher. The Nasdaq Composite was up 1.1%.
Nvidia shares fell 3.5% in New York despite the firm reporting better-than-expected quarterly earnings, and setting out a decent forecast for the current quarter.
The chipmaker, whose position at the heart of an artificial intelligence boom has turned its earnings into a main event for the equity market, reported record second-quarter revenue.
Revenue in the second quarter ended July 28 more than doubled to USD30.04 billion from USD13.51 billion a year earlier.
Net income jumped to USD16.60 billion from USD6.19 billion.
Revenue beat a Reuters cited estimate of USD28.70 billion.
Looking ahead, third-quarter revenue of USD32.5 billion, plus or minus 2%, is expected. That would be a near 80% rise from USD18.12 billion a year earlier. The forecast is ahead of an LSEG-cited estimate of USD31.77 billion.
AJ Bell analyst Dan Coatsworth commented: "Nvidia has lived up to its name and hit the 'Magnificent' seven quarters in a row where earnings have beaten the consensus estimate. Unfortunately, that wasn't enough for the market. Neither was a new USD50 billion buyback programme, something that would normally create a sugar rush for investors.
"It looks like investors might not have taken the average of analyst forecasts to be the benchmark for Nvidia's performance, instead they've taken the highest end of the estimate range to be the hurdle to clear. The top end was USD0.71 earnings per share compared to the USD0.68 earnings per share which the company achieved. Another disappointment for investors was the pace of earnings growth. Even though Nvidia is still making more money each quarter than the previous one, the growth rate is slowing. That has triggered alarm bells in the market that the AI gravy train might be losing power."
The pound was quoted at USD1.3164 at the time of the London equities close on Thursday, lower compared to USD1.3204 on Wednesday. The euro stood at USD1.1077, lower against USD1.1128. Against the yen, the dollar was trading at JPY145.23, up compared to JPY144.38.
The US economy grew 3.0% quarter-on-quarter on an annualised basis in the three months to June 30. The reading was a second estimate. The first showed the economy grew 2.8%.
Growth picked up from 1.4% in the first quarter.
Oxford Economics analyst Ryan Sweet commented: "The revisions to Q2 GDP will not have implications for the outcome of the Federal Reserve's September meeting as its focus is on the labour market. GDP is backward looking. We expect the Fed to cut rates by 25bps in September and then at every other meeting until hitting the neutral fed funds rate."
German consumer prices rose less quickly than expected in August, according to a flash estimate from Destatis.
The consumer price index rose 1.9% annually in August, slowing from 2.3% in July. The reading came in below FXStreet-cited consensus of 2.1%.
On a harmonised basis - which allows for EU-wide comparison - prices rose 2.0% annually, below July's 2.6% rise, and consensus of 2.3%.
Spanish inflation also cooled more quickly than expected in August.
INE, the Spanish national statistics institute, said it estimates that consumer price rises rose 2.2% annually in August, compared to 2.8% in July. Market consensus, according to FXStreet, had expected a reading of 2.4%.
Analysts at Dutch bank ING commented: "If confirmed by tomorrow's eurozone inflation data, today's German data should make the decision to cut interest rates at the September meeting a bit easier for the ECB. Fading inflationary pressure combined with fading growth momentum offer an almost perfect macro backdrop for another rate cut. At the same time, however, forward-looking inflation indicators like selling-price expectations and wage growth show that there are still reasons to be cautious. In fact, let's not forget that for central banks, orchestrating a soft landing with inflation nicely settling at target without hurting the economy is like winning a gold medal at the Olympics: rare."
Brent oil was quoted at USD78.74 a barrel in London, down from USD78.91 late Wednesday. Gold was quoted at USD2,519.68 an ounce, up against USD2,507.11.
In London, hotel firm Whitbread was among the best FTSE 100 performers, rising 3.7%. Bernstein raised the stock to 'outperform' from 'market-perform'.
Close Brothers was the best FTSE 250 performer after Royal Bank of Canada raised it to 'outperform' from 'sector perform'. Close Brothers shares surged 8.3%.
Elsewhere, CAB Payments added 4.8% as it struck a deal to team with Visa.
The collaboration between Crown Agents Bank and Visa "enable fast, efficient and reliable payments and FX".
"Especially across the 'last mile' - a term for the final and most complex stage in the payment process," CAB added.
On AIM, Quiz shares tumbled 13%. The retailer swung to a pretax loss of GBP6.7 million in the financial year ended March 31, from a profit of GBP2.3 million a year ago.
Revenue fell 11% to GBP82.0 million from GBP91.7 million.
Looking ahead, the company said it continues to be impacted by inflationary pressures impacting consumer confidence.
"Given the uncertain economic outlook, sustained and significant improvement in business performance will take time to be realised. These improvements are likely to take time to impact upon revenue and profits so costs control and careful working capital management remains key in securing future growth," Chair Peter Cowgill said.
Friday's economic calendar has a eurozone inflation reading at 1000 BST, before the latest US personal consumption expenditures data at 1330 BST.
By Eric Cunha, Alliance News news editor
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