The Footsie looks set for a strong start after the US Court of International Trade ruled Donald Trump did not have the authority to enact some of his “Liberation day” executive orders on tariffs.
The confidence towards the index, which is weighted towards large multi-national corporations mirrors that seen in Asian markets overnight. But in this rapidly evolving landscape the latest development is unlikely to be the last twist in the tale, and the administration has already lodged an appeal. The world will be watching closely as the United States legal system seeks to hold its highest office to account.
The potential roll back on tariffs has provided some support to Brent Crude prices which are currently up over 1% at around $65.8 per barrel. The prospect of fresh sanctions on Russian exports has also helped to reduce concerns of oversupply. Weekly US oil inventory figures are key numbers to watch out for today.
Stocks on Wall Street were largely down yesterday as investors digested the minutes of the Federal Reserve Bank’s latest meeting, which weighed up the potential for a simultaneous rise in unemployment and inflation. Initial and continuing jobless claims are key data points to look out for later today. Both are forecast to be relatively stable so markets may stumble if the numbers point to more workers struggling to find employment. However, US futures are pointing upwards on the prospect of tariffs reductions but also lifted by stronger than expected tech earnings after the bell.
AI dynamo NVIDIA has powered past concerns surrounding export restrictions on its H20 chips to China after strong data centre growth drove first quarter revenues up 69% to $44.1 billion, 2% better than forecasts. Underlying earnings per share, which ignore the impact of a $4.5 billion write down on inventory destined for China, rose by 57% to 96 cents vs market expectations of 93 cents. It’s seeing strong demand for its processors as corporations and sovereign nations alike scramble to get ahead of the ‘new industrial revolution’.
As well as chips, NVIDIA also makes networking technology over which these massive data sets can flow, and sales of these products are accelerating[DN1] . NVIDIA hasn’t forgotten its gaming roots either, with sales of Gaming and AI PC chips up 48% to $3.8bn and announcing that it’s the force behind the latest incarnation of the Nintendo Switch. Despite an anticipated $8bn blow to revenue from export controls to China, second quarter revenue is still expected to notch up sales growth of around 50%, or 76% when adjusted for the China effect. Investors should also take some comfort that scaling issues for its all-important Blackwell range seem to have been resolved. CEO Jensen Huang noted a tenfold increase in ‘inference usage’, referring AI’s prowess at reasoning and drawing conclusions from data as use of the technology pivots towards more real-world real-time applications.
One such company pioneering products that use AI for inference is Salesforce with its Agentforce platform that offers businesses the possibility of employing autonomous customer-facing bots. It also delivered a Q1 earnings beat and has slightly raised its revenue guidance for the year to $41.0-$41.3 billion, a growth rate of over 8%. Earlier in the week Salesforce put even more weight behind an AI driven future by agreeing to purchase data management firm Informatica for $8 billion. Salesforce shares rose slightly on the day the deal was announced and also added 1.3% in after-hours trading following yesterday’s earnings release.
Tesla Shares were also up after the bell reversing losses from earlier in the day after data emerged showing steep declines in new Tesla vehicle registrations across Europe. The change in sentiment coincided with a report that Tesla could be ready to launch its Robotaxi as early as 12 June. Sentiment has also been lifted after Elon Musk confirmed his departure from the Department of Government Efficiency. Investors are hoping that his focus will now firmly move towards reviving Tesla’s sales and driving its latest technology roll-out.
A party connected to the author holds NVIDIA shares.
Comment provided by Derren Nathan, head of equity research, Hargreaves Lansdown
