Fed minutes in view, US markets are dragged by Nvidia-led tech weakness

• FTSE 100 dragged by HSBC and Glencore declines
• Nvidia shares on the back foot ahead of earnings
• FOMC minutes to provide reminder of cautious approach to easing

The FTSE 100 has been leading the losses in Europe this morning, as tech-led declines seen in the US provide a destabilizing backdrop to today’s session. However, the declines evident within the UK index comes more from a select few stocks rather than a wider picture of weakness, with HSBC (-7%) and Glencore (-6%) leading the losses after their concerning earnings data. HSBC represents the biggest drag on the FTSE 100, as shares in this banking giant tumbled in spite of their record full-year profits for 2023. Investors took a dim view of the $3 billion impairment charge associated with the bank’s Chinese investment, dampening sentiment around the Asia-focused bank. With continued concerns around the Chinese real estate sector, and global interest rates expected to fall, investors are taking a somewhat cautious approach after both earnings and revenues fell short of expectations.

Glencore shares have slumped into a two-year low this morning, following on from an earnings report that has seen this mining giant report a collapse in their adjusted core earnings, which halved from $34 billion to $17.1 billion. This served as a stark reminder of the impact felt by falling commodity prices, with continued difficulties in the Chinese economy highlighting ongoing concerns that we may see further struggles this year.

Looking ahead, traders will undoubtedly be watching Nvidia shares closely as we await earnings from this AI powerhouse. The stock already trades lower in the pre-market, coming off the back of a 4% decline that highlights growing concerns that we may see the wheels start to fall off this incredible rally that has taken the stock 360% higher since the beginning of 2023. Coming late into earnings season, we have largely seen success from competitors in the AI field, with Arm Holdings the particular winner after it doubled in the three-days around their Q4 report. However, the weakness being exhibited by Nvidia shares highlight the potential for this rally to have run too far, with markets requiring yet another sharp ramp-up in earnings to justify the sky-high valuation that briefly saw them overtake Amazon and Alphabet.

FX traders will be keeping a close eye out for today’s FOMC meeting minutes, with the dollar hoping to extend its recent rally that has taken the dollar index up into a three-month high last week. The recent realignment between market and Fed expectations over the timing and pace of monetary easing this year has seen the previous excessive predictions reigned in. However, while markets have shifted their expectations around the timing of the first rate cut from March to June, the current prediction of four 25bp cuts does still contrast from recent Powell comments calling for two or three. Today’s FOMC minutes provide the basis for further hawkish tones, which could help lift the dollar should we see the committee once again reiterate their cautious approach for the year ahead.