Week Ahead: Nvidia earnings, Jackson Hole

00:00:00: Hi and welcome to Swisscote's Daily Market Talk.

00:00:03: It's Monday, August.

00:00:05: the week starts with renewed AI financing where it just as NVIDIA prepares to announce its second quarter earnings on Wednesday this week.

00:00:12: Rather than rising debt doubles in developed economies high energy prices and sub-born inflation keep pressure on global yields As US Treasury Secretary Mr Besson's efforts contain long term bargain cost contrasts but Federal Reserve Chair Kevin Walsh preference to let the markets price the risks.

00:00:32: So all eyes and ears will be on how Mr.

00:00:34: Besant and Warsh views.

00:00:36: we'll play out across The Ballmarkies this week, And We Will Talk About All That & More in This Episode.

00:00:41: but before we do it as always please keep in mind that opinions are my own.

00:00:53: So on Friday, a pose-increasing rally and encouraging data from Europe & US gave support to equity indices.

00:01:02: On both sides of the Atlantic Ocean.

00:01:04: In Europe despite soft services PMI Visa cross France and Germany The improved manufacturing numbers for August boosted appetite for the stock's six hundred index in the U S. this MP five hundred rebound as well And that rebound was mostly on the back of strong PMI visas.

00:01:22: us crude spot price also remained capped near day moving average despite tensions.

00:01:27: This morning, oil is weaker and the latter helps easing pressure on global yields.

00:01:32: as everybody's waiting for what Besson will say in terms of fiscal consolidation The US.

00:01:36: yet risk sentiment remains dull.

00:01:38: Technology companies especially are kicking off this week with heavy losses.

00:01:42: In Korea some song electronics is down by nearly nine percent at a time I'm talking here today Despite its latest share buyback announcement nearly ten percent this morning as news that they will issue new equity to finance AI spending displeased investors.

00:02:01: Well in Japan, Soft Bank slips nearly four and a half percent at the time I'm talking here after announcing its own plans to raise capital through share sale as well.

00:02:12: As i said last week with strong second quarter earnings already baked into market prices The renewed AI financing worries And political geopolitical headlines are gently taking control of the market action.

00:02:24: Trade tensions, on the other hand are back in their headlines this morning following US and Canada's failure to reach a trade agreement.

00:02:31: Tensions in the Middle East continue to disrupt oil flows without an easy resolution in the short run And debt levels across the so-called developed world keep rising with U.S.

00:02:41: four-to-trillion U. S. dollar debt burden now sitting like an elephant in the room.

00:02:45: So In this context energy prices will continue to matter but the way Washington is trying to manage its fiscal and monetary policies will matter as well due to its impact on US borrowing costs that on his turn ripple through the global financial markets and global borrowing cost.

00:03:03: So this week all eyes we'll be on NVIDIA earnings during Wednesday but also on Jackson Hole meeting, how Mr Besson and Mr Kevin Warsh could work out their differences in terms of how they would control U.S yield curve?

00:03:17: Now let's start with NVIDia.

00:03:18: I will come to Bessin Warsh very quickly for NVIDA!

00:03:22: This week on Wednesday and expectations are enormous.

00:03:25: obviously second quarter revenue is expected near ninety two billion US dollars.

00:03:30: That's up roughly ninety seven percent year over a year.

00:03:33: Well with the estimates or even higher than that around ninety three to ninety five billion us dollar in Revenue will allow stellar results may not guarantee a positive market reaction when The markets sentiment is souring regarding AI.

00:03:47: health waste recently evaporating free cash flow levels at major big technological companies, who happen to be Nvidia's biggest customers too, revive AI financing worries during the second quarter earnings announcements.

00:03:59: And two big names Alibaba and SoftBank are punished today for seeking more financing through new equity sales gives an idea on how fragile overall market sentiment has become regarding AI complexity to the financing worries.

00:04:15: As such, Nvidia may not save today on Wednesday when it announces its earnings after the bell even with great quarterly results and shiny guidance.

00:04:25: Now zooming out, the macroeconomics setup is not brilliant either.

00:04:28: Global yields which are now under pressure due to rising energy prices due to the Middle East War failed to come lower after US Treasury Secretary Besant announced last week to double the amount of long maturity U.S.

00:04:39: debt that it could buy back.

00:04:41: The latter fail to convince investors to buy a U. S. debt along an race.

00:04:45: serious questions ahead this weeks Jackson Hole meeting.

00:04:49: so the attention today's very much on how Kevin Walsh will react to these latest developments.

00:04:54: In fact, if you're looking into the saga Besen who is moving toward a more interventionist yield curve control like strategy tame pressure on port of as possible.

00:05:10: That means he needs low interest rates, but Walsh on the other hand wants market to do more off-the-work.

00:05:17: He wants him away from heavy Federal Reserve forward guidance and he has been very much critical indeed.

00:05:23: after federal reserves oversized balance sheet And US inflation that is now running above the two percent target for half a decade.

00:05:31: Now The fact that U.S.

00:05:32: Treasury will be buying more bonds won't grow the Federal Reserve's balance sheets.

00:05:37: This Is not quantitative easy to remember, but it could prevent the market from fully pricing inflation and fiscal risk and reacting to policy decisions.

00:05:47: In other and simpler words The US Treasury's action would interfere with the transmission of monetary policy into the economy.

00:05:54: as such It can make a Federal Reserve job.

00:05:56: bringing inflation back towards its two percent policy target was somehow harder And that is something Kevin Walsh probably wants to avoid If nothing to avoid looking like of the entire world.

00:06:09: Now, honestly I doubt that.

00:06:11: but if Treasury actually does succeed in pushing long-term yields materially lower while oil prices are rising and tandem inflation remains above the Fed's target well it could eventually impact a long term yield in the US and financial conditions in the U.S would lose in on that regardless off the Federal Reserve's input into the cake and letter with keep inflation rising.

00:06:34: So there is a fascinating institutional tension right now in the US.

00:06:38: Warsh is effectively saying, let the market price rise!

00:06:41: Well Besson is saying not if that market pricing makes U.S government borrowing prohibitively expensive And that's why Jackson Hole meeting this year could be explosive.

00:06:51: Warsh needs to regain his credibility after his latest post-FYMC presser confused investors regarding his reaction function to inflation, so if he decides use the Jackson Hole speech will rescue the US Treasury market, it would effectively push back against what Mr.

00:07:14: Besan has just done and that without ever mentioning Besan by name.

00:07:18: But on the other hand, I'm thinking well Warsh was put in this position just a few months ago by the same US administration.

00:07:24: Meaning that he cannot completely turn his back to the Broder Washington plan.

00:07:30: So what Besson will say about the fiscal consolidation?

00:07:33: How Will Warsh react to their recent developments and how Will Marcus reacts?

00:07:37: all of them together will be the major topic for this week.

00:07:40: at the moment We no longer know who will ultimately control the long end of U.S.

00:07:45: yield curve department, will it be the Fed or will it beat the ball market itself?

00:07:51: Let me tell you something.

00:07:52: In the wake of last week's Reaction to Treasuries announcement, the markets still say is the last war.

00:07:58: so maybe but just will manage to bring some clarity on how the Federal Reserve under Kevin Warshville fits in this picture, but in any case US seals won't magically fall while U.S.

00:08:13: tech keeps growing and Middle East tensions keep energy prices elevated!

00:08:17: Remember Besson is expected to unveil a fiscal consolidation plan at maybe as early today.

00:08:23: perhaps an attempt get ahead of the bond market with whether investors play along.

00:08:27: it's yet of twists and turns, I think.

00:08:33: And we will talk about all that throughout this week.

00:08:35: but this is all for this Monday!

00:09:00: Subscribe to our YouTube channel, of course for daily market comments and please don't forget hit the like button on these videos so that you can enjoy them.

00:09:11: I will meet again tomorrow!

00:09:14: Good day trading!