Daily Market Outlook, May 23, 2024

Munnelly’s Macro Minute…

“Nvidia Earnings Beat Sees US Markets Soar To New All Time Highs ”

Following the release of positive quarterly results by Nvidia, US market futures experienced a surge and Asian stocks saw an increase, reigniting expectations for a global artificial intelligence boom. The prominent chipmaker surpassed expert predictions by announcing an estimated second-quarter revenue of around $28 billion. Additionally, the company raised its quarterly dividend by 150% to 10 cents per share and declared a 10-for-1 stock split. Nvidia's shares rose by up to 7% during trading hours in response to the company's performance. The gains in semiconductor manufacturers in South Korea, Taiwan, and Japan contributed to the overall rise in Asian equities. A Bloomberg index tracking chipmakers also saw a 1.9% increase, following the lead of Nvidia.

Today's flash PMI surveys for May will be closely scrutinized, especially for the UK and the Eurozone. Expect stabilization in services activity and improvements in manufacturing. Overall, the survey is expected to indicate that the economic recovery is continuing into the middle of Q2. However, there will be notable differences between sectors and between the UK and the Eurozone. In both regions, services activity is predicted to significantly outperform manufacturing. UK activity and price signals have also surpassed those of the Eurozone, aligning with the Bank of England’s cautious approach to easing policy. In contrast, the European Central Bank has indicated a high likelihood of reducing rates next month. Expect the UK and Eurozone manufacturing PMIs to increase to 50.1 and 46.2, respectively. For services PMIs, look for slight declines to 53.6 in the UK and 53.0 in the Eurozone, but they are still expected to drive the recovery. In the Eurozone, the ECB will release Q1 negotiated wage data. The most recent Q4 data showed a decrease to 4.5% from a high of 4.7% in Q3. Policymakers will be hoping for further progress towards more sustainable wage growth to promote moderation in services price inflation.

Stateside, the release of Markit flash PMIs is also scheduled, although they typically receive less market and policymaker attention than their UK and Eurozone counterparts. Additionally, US weekly jobless claims data and monthly new home sales figures are due. 

Central bank speakers today include the Bank of England’s Chief Economist, Pill, who has previously expressed caution about easing policy. Yesterday’s UK CPI inflation data likely did little to ease his concerns about persistent services price inflation.

Overnight Newswire Updates of Note

  • Fed Officials Saw Longer Wait For Cuts After Inflation Setbacks

  • Goldman’s Solomon Says He Sees ‘Zero’ Rate Cuts This Year

  • Rick Scott Enters Race To Succeed McConnell As GOP Senate Leader

  • ECB’s Schnabel Sees Modest Revival In Euro-Zone Economy

  • BoE Will Cut Interest Rates In August, Says Goldman Sachs

  • Prime Minister Rishi Sunak Calls UK National Election For July 4

  • Japan's Factory Activity Expands For First Time In A Year, PMI Shows

  • Australian PMI Points To Resilience In Economy, Stubborn Inflation

  • Orr Says RBNZ Would Only Hike To Curb Inflation Expectations

  • South Korea Sets Aside Record $19 Billion To Fuel Chipmaking

  • Russia Pledges To Make Up For Crude Overproduction In April

  • Nvidia Gives Strong Forecast, Reflecting Sustained AI Momentum

  • Tesla Pushes Suppliers To Produce Parts Outside Of China, Taiwan

  • BHP Has A Week To Convince Anglo Its South African Plan Can Work

  • China Holds Biggest Military Drills In A Year Around Taiwan

(Sourced from Bloomberg, Reuters and other reliable financial news outlets)

FX Options Expiries For 10am New York Cut

(1BLN+ represent larger expiries, more magnetic when trading within daily ATR)

  • EUR/USD: 1.0830 (250M), 1.0850 (260M), 1.0870 (246M), 1.0885 (293M)

  • 1.0900 (1.7BLN)

  • EUR/GBP: 0.8510 (330M), 0.8525-30 (411M)

  • GBP/USD: 1.2670 (404M), 1.2690 (226M), 1.2735 (368M), 1.2750-55 (527M)

  • NZD/USD: 0.6125 (438M), 0.6175 (479M). AUD/NZD: 1.0900 (420M)

  • USD/CAD: 1.3665-75 (1.3BLN), 1.3685 (300M), 1.3755 (500M)

CFTC Data As Of 17/05/24

  • Japanese yen net short position is -126,182

  • British pound net short position is -20,075

  • Euro net long position is 17,155 contracts

  • Swiss franc posts net short position of -41,107

  • Bitcoin net short position is -177 contracts

  • Equity fund managers raise S&P 500 CME net long position by 60,168 contracts to 920,863

  • Equity fund speculators increase S&P 500 CME net short position by 40,882 contracts to 279,337

  • Gold NC Net Positions: $204.5K vs $199.6K

Technical & Trade Views

SP500 Bullish Above Bearish Below 5330

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Below 5314 opens 5285

  • Primary support 5250

  • Primary objective is 5379

EURUSD Bullish Above Bearish Below 1.08

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Above 1.10 opens 1.11

  • Primary resistance 1.0981

  • Primary objective is 1.0550

GBPUSD Bullish Above Bearish Below 1.27

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Below 1.2700 opens 1.2640

  • Primary support  is 1.2590

  • Primary objective 1.2780

USDJPY Bullish Above Bearish Below 153.59

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Below 154.40 opens 152

  • Primary support 152

  • Primary objective is 165

XAUUSD Bullish Above Bearish Below 2360

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Below 2330 opens 2280

  • Primary support 2330

  • Primary objective is 2560

BTCUSD Bullish Above Bearish below 67000

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Below 65000 opens 63000

  • Primary support is 65000

  • Primary objective is 78500