Morning Bid: US spotlight back on Nvidia

Economic

Summary:

Investor focus returns to Nvidia amid AI hype and China chip curbs, while ECB’s Lagarde calls for the euro to rival the dollar. Markets react to trade relief, bond volatility, and geopolitical shifts.

After weeks of trade and debt anxiety, the spotlight has shifted back to the artificial intelligence theme on Wednesday, as investors wait with rare trepidation for Nvidia's (NVDA.O) , opens new tab quarterly earnings.

I'll dive into all of today's other market news and then explain the significance of the timing of ECB President Christine Lagarde's recent call for the euro to replace the dollar as the world's reserve currency.

Today's Market Minute

* Demand at an auction of 40-year Japanese government bonds on Wednesday fell to the lowest since July, during a selloff in super-long debt this month.

* Oil prices settled 1% lower on Tuesday as investors worried about a supply glut after Iranian and U.S. delegations made progress in their talks and on expectations that OPEC+ will decide to increase output at a meeting this week.

* President Vladimir Putin's conditions for ending the war in Ukraine include a demand that Western leaders pledge in writing to stop enlarging NATO eastwards and lift a chunk of sanctions on Russia, according to three Russian sources with knowledge of the negotiations.

* If the United States is to significantly reduce or eliminate its trade deficit, the dollar will have to weaken a lot. How much is unclear, as history shows large dollar declines are rare and have unpredictable consequences for trade. Check out Reuters columnist Jamie McGeever's latest piece.

* U.S. President Donald Trump's sweeping tax and spending bill calls for drastic cuts to clean energy tax credits that have been major drivers of the recent boom seen in utility-scale renewable power and battery capacity. In Reuters columnist Gavin Maguire's latest piece, he outlines the potential implications of this in six charts.

Spotlight back on Nvidia

The inevitable levelling off of Nvidia's explosive growth is already underway, but the chip designer also faces investor worries about AI overspend and questions about how much U.S. chip curbs on China will cost the company going forward.

Nvidia's stock price - which is basically unchanged in 2025 to date - climbed anew on Tuesday along with the broad market rally. That was helped by reports that the company will launch a new chipset for China at significantly lower prices than the currently restricted H20 model.

Meanwhile, the overall market mood improved considerably, with the S&P 500 (.SPX) , opens new tab jumping 2% on relief over temporarily defused U.S.-European trade tensions, a retreat in long-term government debt yields, and positive U.S. consumer confidence readings for May.

However, there were mixed takes on the May household survey, capital goods orders data for last month was soft, and edginess in long bond markets is already coming back.

So the main driver of the rally was likely the U.S.-EU trade news after Trump backed down from Friday's 50% tariff threat against the European Union, delaying its implementation until July 9.

EU officials have asked leading European companies and CEOs for details of their U.S. investment plans, according to two sources familiar with the matter, as Brussels prepares to advance trade talks with Washington.

Tensions on long-dated government debt resurfaced today, meantime, with another tepid sale of Japan's ultra long bonds, reinforcing speculation that Tokyo may be forced to trim sales of debt of such long maturities as fiscal worries grow.

The Ministry of Finance sold about 500 billion yen ($3.46 billion) of 40-year bonds with a bid-to-cover ratio of 2.21, the lowest since a sale in July last year and well below the historical average of 3.

That saw 30-year JGB borrowing rates jump back about 5 basis points from Tuesday close, drawing long-dated yields higher around the world. The yen strengthened slightly on the day.

With its own home-grown fiscal concerns, the U.S. saw 30-year yields also back up about 5 bps to just under 5%. Some $70 billion of 5-year Treasury notes come under the hammer later.

Meanwhile, investor attention has also turned to a Financial Times report that European Central Bank President Christine Lagarde considered stepping down before her term ends in 2027.

The ECB responded by saying Lagarde was determined to complete her eight-year term.

Elsewhere, the New Zealand dollar held firm even after the country's central bank cut its benchmark rate by 25 bps to 3.25% and flagged a slightly deeper easing cycle than it forecast three months ago.

And Shein is working towards a listing in Hong Kong after the online fast-fashion retailer's proposed initial public offering in London failed to secure the green light from Chinese regulators.

Now to today's column, where I look into this week's combative speech from ECB boss Lagarde on the status of the euro.

Lagarde's euro 'battle cry' emphasizes EU cash need

If the euro supplants the dollar as the world's main reserve currency, Europe might lose some currency competitiveness - but the related capital flows it's seeking more than compensate.

European Central Bank President Christine Lagarde , opens new tab weighed in on the debate about the euro's global reserve status on Tuesday by reiterating the ECB's long-standing aim to boost the currency's wider use and position it as the logical alternative to the dollar.

The euro has long been the clear second choice in reserve usage, both in the positive and negative sense. While its share of overall reserve coffers is still far behind the dollar's, the euro is way ahead of any other serious rivals to the greenback bar gold.

But what was eye-catching about the very vocal ECB support for wider euro usage was the timing and thrust.

Lagarde's statements come amid fresh doubts about the dollar's haven status, the U.S. economy's role in the world at large and America's fraying geopolitical alliances - as well as the Trump administration's perceived desire for a weaker, more competitive exchange rate.

And Lagarde's speech clearly framed U.S. difficulty as Europe's opportunity.

After noting that the dollar and U.S. financial markets had been effective global anchors for decades, she added that "when doubts emerge about the stability of the legal and institutional framework, the impact on currency use is undeniable."

"These doubts have materialized in the form of highly unusual cross-asset correlations since April 2 this year, with the U.S. dollar and U.S. Treasuries experiencing sell-offs even as equities fell," the ECB chief explained, referring to market ructions after Trump's 'reciprocal tariff' gambit last month.

"The EU has a legitimate reason to turn its commitment to predictable policymaking and the rule of law into a comparative advantage," Lagarde added, underscoring the need for political and internal capital market reforms in the EU that would enable the bloc to seize this opportunity.

Clearest of all was her plea for joint debt issuance to boost the scale of 'safe' euro assets, a move that is still controversial within Europe due to persistent German pushback.

"Economic logic tells us that public goods need to be jointly financed," she said, re-upping the ECB's preference for expanding the pool of jointly issued euro assets.

And she also pointedly underlined the attraction of Europe's military rearmament to official investors who "seek geopolitical assurance in another form: they invest in the assets of regions that are reliable security partners and can honour alliances with hard power."

WHATEVER IT TAKES

The frank speaking caught everyone's attention.

Rabobank strategist Jane Foley said the speech had a "battle cry" element to it.

It's still anyone's guess what the outcome will be of the bilateral U.S.-EU trade talks come July's deadline and as a host of disagreements remain. Trump's jarring stop/start EU tariff announcements this past weekend make it difficult to sketch out a possible resolution, and many experts suspect Washington is intent on talking to individual countries to split the group.

The tone of the ECB's stance suggests it's bracing for the risk of harsher standoffs ahead.

What's more, Lagarde's statement comes as the euro's nominal broad exchange rate has soared to record highs, up almost 20% over the past decade.

While that won't please many exporters in the bloc, it does suggest that the ECB - unlike the U.S. administration - is comfortable with its currency's structural strength and thus may be willing to ease policy accordingly. And that will help with the additional debt financing needed of Europe's ambitious new projects - most notably in defense, green energy and tech.

Morning Bid: US spotlight back on Nvidia_1

A line chart showing the euro against the dollar

On that financing need, central and private sector bankers tend to agree with former ECB chief Mario Draghi about the scale of what is needed, as outlined in his recommendations last summer. , opens new tab

For example, BNP Paribas economist Laurent Quignon , opens new tab wrote on Tuesday about the total sums needed, as he made a pitch on what Europe can do this year to boost financing via changes to regulation, securitization and the banking union.

Adding Draghi's call for annual energy and tech investments of up to 800 billion euros to an almost 200 billion euros of new defense spending and on top of ongoing commitments, he calculated an additional annual EU financing requirement of 1.5 trillion euros through 2028 and 1.4 trillion from then to 2030.

That would be more than double the flows observed in the decade through 2024 - and about the same as the total amount of European money that has flowed into the U.S. equity market since 2012.

Whatever the implications for exchange rate competitiveness, Europe now has a big bill to pay. Some 'exorbitant privilege' would help.

Chart of the day

Morning Bid: US spotlight back on Nvidia_2

Chart represents the percentage by which Nvidia has exceeded or not met analysts' expectations for quarterly revenue. Nvidia has outdone estimates for nine consecutive quarters.

'Nvidia day' (NVDA.O) , opens new tab has become a moment of great excitement for markets in recent years, as the AI darling's stellar earnings and stock gains have typically impressed Wall Street. But investors are approaching today's announcement with caution.

That's because Trump's administration, in a fresh effort to limit Beijing's access to cutting-edge technology, last month put export limits on Nvidia's H20 chip, a move the company said would result in $5.5 billion in charges. While the company is expected to report first-quarter revenue surged an annual 66.2% to $43.28 billion, analysts put the quarterly revenue hit ahead from the China chip curbs at anywhere from $3-$4.5 billion.

Today's events to watch

* Richmond Federal Reserve's May business surveys (10:00 AM EDT); Dallas Federal Reserve May service sector survey (10:30 AM EDT)

* Federal Reserve releases minutes of last policy meeting; New York Fed President John Williams and Minneapolis Fed chief Neel Kashkari speak

* U.S. Treasury sells $70 billion of 5-year notes, $28 billion of 2-year floating rate notes

* U.S. corporate earnings: Nvidia, Agilent, Salesforce, Synopsys, Nordson

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles , opens new tab, is committed to integrity, independence, and freedom from bias.

source : reuters

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Warren Takunda

Economic

Central Bank

A potential reduction in Japan's government bond supply is pushing down longer-dated global yields. But fiscal concerns continue to linger, thereby limiting the downside potential of UK gilt yields. Tariffs continue to drive the short end of the curve and relatively good consumer confidence data from the US shows the Fed is not yet in a position to cut

Treasurers are looking at issuance strategies to ease upward pressure on yields

The global fiscal/supply-themed curve steepening has noticeably turned on the back of long-end Japanese government bonds (JGBs) rallying over the past session. A survey sent out by Japan’s Ministry of Finance suggested a potential reduction in issuance. Tuesday’s rally in 30y US and EUR rates did not go as far as the 19bp drop in Japanese Government Bonds, but declines of around 5bp brought the 30y US Treasury yield back below 5% and the 30y Bund even below the starting levels of the previous week. The demand for the 40y JGB auction earlier today was weak, however, suggesting still fragile sentiment.

The gains for longer-dated UK gilts were relatively muted, highlighting investors’ concerns about the country’s fiscal outlook. The Debt Management Office had already flagged a shift away from longer-dated issuance because of weaker demand from investors. But this doesn’t change the fact that markets are concerned about the government’s limited fiscal headroom. With a spending review scheduled on 11 June, the potential for 10y and 30y gilt yields to ease lower may be limited.

Lingering tariff concerns bring uncertainty to central bank moves

Adding to this is the recent tariff noise. After triggering a risk-off reaction last Friday, followed by back-pedalling over the weekend, the US side looks like it is trying to instil more optimism around the possibility of forthcoming deals. The previous truce with China, for instance, helped the Conference Board’s consumer sentiment on Tuesday rebound more than markets had anticipated. But to begin with, the data has been showing a discrepancy between the still solid current conditions and the more pessimistic outlook.

Arguably, it has been the current consumer spending that is keeping the economy afloat and, by extension, making the Fed more wary about near-term policy decisions. Markets will continue to be worried about the potential price impact from tariffs, and more benign PCE data later this week is unlikely to dispel those concerns. The market is eyeing better chances for the Fed to cut rates from September onwards. Paired with the ongoing unease about the US fiscal trajectory, we do not see much room for US yields to decline much further from here.

But for the EU, the current situation still means a 50% tariff is looming, raising the stakes in the ongoing negotiations. This is why this side of the Atlantic market is still eyeing a cut by the ECB next month to 2% alongside the possibility that the central bank may even have to cut beyond 1.75% this year.

Source: ING

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Adam

Economic

Nvidia's (NVDA) earnings and revenue beat Wall Street's expectations nearly every quarter over the past two years.

Over the past eight quarters, Nvidia's earnings per share exceeded Wall Street's projections by an average of 9.8%. Over that same time frame, Nvidia's quarterly revenue beat the Street by an average of 8.9%.

Meanwhile, S&P 500 companies reported earnings and sales roughly 5% and 1.3% above Wall Street's expectations in that time frame, according to Bloomberg data.

Only once in that period — during the second quarter of its fiscal year 2025 — did Nvidia's earnings miss forecasts. Its revenue has exceeded forecasts during each of the past eight quarters.

Stifel analyst Ruben Roy and Bank of America's Vivek Arya expect that Nvidia's April quarter earnings results — its fiscal 2026 first quarter — will show a "modest" beat, coming in above Wall Street's projections as they expect demand for the company's Hopper and Blackwell chips will outweigh potential impacts from a newly enacted ban on exports of its H20 chips to China.

Wall Street analysts estimate that Nvidia will report adjusted earnings per share (EPS) of $0.88 on revenue of $43.3 billion, according to Bloomberg consensus data. The chipmaker reported adjusted EPS of $0.61 on revenue of $26 billion in the same period last year, Yahoo Finance's Dan Howley reported.

"We expect largely inline results and outlook despite the negative top-line impact related to recently disclosed H20 restrictions," Stifel analyst Ruben Roy wrote in a May 22 note to investors, citing "demand for H200, coupled with initial GB200 ramps."

Nvidia's H200 chips are its second-generation Hopper graphics processing units (GPUs), and its GB200 servers contain 72 of its Blackwell GPUs.

In February, Nvidia reported earnings and revenue for its fiscal fourth quarter that surpassed Wall Street's expectations as the chipmaker officially announced that it had achieved full-scale production of its latest Blackwell GPUs and generated $11 billion during the period from the latest AI chips.

Nvidia stock fell 8.5% following its fourth quarter report, however, as its outlook for the first quarter gross margin came in lower than estimates. Options traders tracked by Bloomberg forecast shares could rise or fall as much as 7.4% following Nvidia's results Wednesday after the bell.

Nvidia stock has struggled in 2025. Shares plunged in January when a new cheap AI model from Chinese startup DeepSeek prompted demand concerns for its AI chips, and again in April as Trump's trade war rocked the stock market.

The stock rose over 3% on Tuesday and traded flat on Wednesday ahead of the chipmaker's earnings report.

Source: finance.yahoo

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Olivia Brooks

Economic

Commodity

Opec+ gathered online on Wednesday to ratify their current group-wide production quotas, ahead of a decision by eight key members at the weekend whether to bolster output again in July.

The Organization of the Petroleum Exporting Countries and its partners will leave unchanged their longer-term targets for 2025 and 2026, which underpin its current supply restraints, delegates said after their video conference got underway.

The more market-sensitive discussion on whether to continue their 411,000 barrel-a-day hikes, which have sent prices crashing over the past two months, will be finalised in a video conference on Saturday, delegates said, asking not to be identified as the talks are private.

The sequencing of the meetings underscores how oil quotas for the full 22-nation Opec+ alliance have receded in importance over the past two years, as actual supply adjustments are carried out by sub-group of eight countries, led by Saudi Arabia and Russia.

It was these nations that shattered market expectations on April 3, when they announced their first super-sized hike — triple the volume originally scheduled. The shock move, unveiled just hours after President Donald Trump launched a global trade war, helped send crude futures to a four-year low below US$60 a barrel in the ensuing days, marking a rupture with years of efforts by the coalition to try to shore up prices.

Brent contracts have since stabilised near US$65 as Trump has reversed some of his trade tariffs.

Opec+ delegates have offered a range of explanations for the policy reversal: from satisfying summer fuel demand to punishing over-producing members, and from placating President Trump to recouping lost market share.

In theory, Wednesday’s gathering could have given the Saudis the opportunity to further these last two objectives.

While the eight countries are just over half-way through restoring roughly 2.2 million barrels of output halted since 2023, if they maintain the current accelerated pace of increases, they will have completed that process by October.

If Opec+ were fully committed to regaining market share it could have proposed changing those underlying output quotas during the discussion on Wednesday. Saudi Energy Minister Prince Abdulaziz bin Salman has built a reputation for springing last-minute surprises, but delegates said such moves aren’t on the agenda.

The first meeting on Wednesday was of the Joint Ministerial Monitoring Committee, comprising a selection of Opec+ members that review oil market conditions. It concluded without making any recommendations, delegates said.

That was followed by a gathering of the full 22-country Opec+ group. Finally the 12 core Opec members will hold one of the two obligatory annual check-ins, which tend to be largely administrative affairs.

Ministers’ discussions will include a mechanism for their previously agreed plan to assess baseline production levels for 2027, according to delegates.

Source: Theedgemarkets

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Adam

Commodity

Gold prices are posting modest gains in early U.S. trading Wednesday, while silver prices are slightly up. Trader and investor risk appetites have improved recently, which is limiting buying interest in the safe-haven metals. June gold was last up $8.50 at $3,308.90. July silver prices were last up $0.034 at $33.345.

The U.S. data point of the day will be the afternoon release of the minutes from the last meeting of the Federal Reserve’s Open Market Committee (FOMC).

Asian and European stock markets were mixed in overnight trading. U.S. stock indexes are pointed to slightly higher openings today in New York, after posting strong gains Tuesday. Trader and investor risk appetite has improved recently, as the U.S. has taken a more conciliatory tone on its trade relations with other major economies.

The key outside markets today see the U.S. dollar index slightly higher. Nymex crude oil futures prices are firmer and trading around $61.50 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently at 4.467%.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the Johnson Redbook weekly retail sales report, the Richmond Fed business survey, and the Federal Reserve’s FOMC minutes from the last meeting.

Gold price up a bit as FOMC minutes awaited_1

Technically, June gold futures bulls have the overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at $3,400.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the May low of $3,123.30. First resistance is seen at the overnight high of $3,324.50 and then at $3,350.00. First support is seen at the overnight low of $3,289.90 and then at $3,275.00. Wyckoff's Market Rating: 6.5.

Gold price up a bit as FOMC minutes awaited_2

July silver futures bulls have the slight overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $34.015. The next downside price objective for the bears is closing prices below solid support at the May low of $31.78. First resistance is seen at this week’s high of $33.745 and then at $34.015. Next support is seen at $33.00 and then at this week’s low of $32.88. Wyckoff's Market Rating: 5.5.

Source: kitco

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Damon

Economic

Commodity

OPEC+ is discussing a mechanism for setting baselines for its 2027 production at a meeting on Wednesday, delegates said, while separate talks due on Saturday could agree a further accelerated oil output hike for July.

The group, which includes the Organization of the Petroleum Exporting Countries and allies such as Russia, has been discussing new baselines - production levels from which each member makes cuts or increases - for the last few years.

Baseline issues are controversial because some members such as the United Arab Emirates and Iraq have increased their oil production capacity, pressing the case for higher quotas, while others such as African members have seen declines.

The 22-member group on Wednesday may adopt a mechanism to help establish the baseline assessment for 2027, two of the delegates said. The Wednesday meeting will not change output policy, sources said while the talks were underway.

On Saturday, eight OPEC+ members who are in the process of gradually raising output are set to meet and may agree an output hike for July of 411,000 barrels per day, the same as in May and June, the delegates said.

All sources declined to be identified by name due to the sensitivity of the matter.

OPEC+ has agreed three layers of output cuts since 2022. Two of these are in place until the end of 2026 and one is currently being unwound by the eight members.

The 2027 baselines in theory could feature in production policy when all output cuts currently in place expire.

Oil pricesfell to a four-year low in April below $60 per barrel after OPEC+ said it was accelerating its output hike in May and as U.S. President Donald Trump'stariffsraised concerns of global economic weakness. Since then it has recovered to about $65.

Earlier this month, sources told Reuters that the eight countries, in addition to an output hike for July, may unwind the remainder of the most recent cut by the end of October.

Source: TradingView

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Michelle

Political

Economic

Elon Musk is criticizing the centerpiece of President Donald Trump’s legislative agenda, a significant fracture in a partnership that was forged during last year's campaign and was poised to reshape American politics and the federal government.

The billionaire entrepreneur, who supported Trump’s candidacy with at least $250 million and has worked for his administration as a senior adviser, said he was “disappointed” by what the president calls his “big beautiful bill.”

The legislation includes a mix of tax cuts and enhanced immigration enforcement. While speaking to CBS, Musk described it as a “massive spending bill” that increases the federal deficit and “undermines the work” of his Department of Government Efficiency, known as DOGE.

“I think a bill can be big or it could be beautiful,” Musk said. “But I don’t know if it could be both.”

His CBS interview came out Tuesday night. White House officials did not immediately respond to questions. Republicans recently pushed the legislation through the House and are debating it in the Senate.

Musk’s comments come as he steps back from his government work, rededicating himself to companies like the electric automaker Tesla and rocket manufacturer SpaceX. He's also said he'll reduce his political spending, because "I think I’ve done enough.”

At times, he's seemed chastened by his experience working in government. Although he hoped that DOGE would generate $1 trillion in spending cuts, he's fallen far short of that target.

“The federal bureaucracy situation is much worse than I realized,” he told The Washington Post. “I thought there were problems, but it sure is an uphill battle trying to improve things in D.C., to say the least.”

Musk had previously been effusive about the opportunity to reshape Washington. He wore campaign hats in the White House, held his own campaign rallies and talked about excessive spending as an existential crisis.

He was also effusive in his praise of Trump.

“The more I’ve gotten to know President Trump, the more I like the guy," Musk said at one point. "Frankly, I love him.”

Trump repaid the favor, describing Musk as "a truly great American.” When Tesla faced declining sales, he turned the White House driveway into a makeshift showroom to illustrate his support.

It's unclear what, if any, impact that Musk's comments about the bill would have on the legislative debate. During the transition period, he helped whip up opposition to a spending measure as the country stood on the brink of a federal government shutdown.

But Trump remains the dominant figure within the Republican Party, and many lawmakers have been unwilling to cross the president when he applies pressure for his agenda.