Market Update – 29th August 2024.

29th August 2024

On Wednesday, tech giant Nvidia reported better than expected earnings. Revenue increased by 122%, smashing estimates of 113% growth out of the park. In addition to this, the company announced their plan to repurchase $50 billion in shares. The latest earnings data perhaps quietens some investor worries that Nvidia’s AI dominance in the tech market is starting to wane. According to their CFO, demand for their newest Blackwell chip is still surpassing the company’s ability to supply, although she provided reassurance that availability has improved. And yet, shares in Nvidia were down in hours after trading, closing 2.1% lower and suggesting that at least some investors engaged in a profit taking exercise following the report.

The company acknowledged facing production challenges with its upcoming AI chip. In the markets, the focus is on the extent to which the company surpasses estimates. Investors expect them to perform exceptionally well, creating a high bar that could lead to disappointment if those expectations aren’t met.

Over in the US, consumer confidence has increased to 103.3 from a revised 101.9 in July – the highest since February. The index is representative of how the American people feel about current economic conditions as well as their overall outlook for the next 6 months. Economists have suggested that the survey coinciding with the political handover from Present Biden to VP Harris in the presidential race may have influenced the result, although the Index did not mention any political forces shaping the data. Optimism is thought to have been bolstered by inflation expectations which dropped to 4.9% in August from 5.3% in July. Taken together with a notable concern about the labour market and the unemployment rate, the data perhaps further supports a rate cut by the Federal Reserve at their September meeting.

British shop prices dropped in August for the first time in nearly two years, according to a report released Tuesday by the British Retail Consortium. Prices fell 0.3% year-on-year, reversing a 0.2% increase seen in July. The decline was driven by retailers slashing prices to clear seasonal stock after wet weather dampened consumer spending. However, factors such as climate change disrupting commodity cycles and ongoing geopolitical conflicts could prevent price reductions in the future from becoming a recurrent theme.

In Hong Kong, the property market is adapting to a changing demographic of home seekers. Traditionally focused on selling flats in residential developments, developers are now shifting toward the rental market. This has been driven by government initiatives that have sought attract talent, including offering two-year visas to graduates from the world’s top 100 universities. It is thought that this move may also help developers weather the current property market downturn.

Still to come this week we have Tokyo’s CPI and Japan’s unemployment rate, US PCE data and Michigan Consumer Sentiment.

Nicola Tune, Portfolio Specialist