Investors on edge over Nvidia earnings

Good morning. Here's what happened overnight and what you need to know today.

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1.

Centre of attention: Nvidia stocks are drawing big bets ahead of earnings this morning. The AI semiconductor darling will report Q4 FY24 earnings after market close in the States this morning, with a deluge of options trading implying an (approximate) 11% move in either direction. The Wall Street Journal reports that analysts are broadly bullish on Nvidia stock, which has gained more than USD1 trillion ($1.53 trillion) in market value over the past year. Analysts’ mean price target is near USD752, roughly 10% above the stock’s recent price around USD681. That target has climbed from around USD670 at the end of 2023. Investors are set to scrutinise Nvidia’s results for any signs around ongoing appetite for AI stocks which have largely driven markets of late. (Wall Street Journal)(Bloomberg)

2.

Trading ban: China has banned major institutional investors from reducing equity holdings at both the open and close of trading, in the government’s latest effort to aid the country’s struggling stock market. The China Securities Regulatory Commission delivered the order directly to asset managers and brokerages, according to unnamed sources cited by Bloomberg, in order to tighten the government’s grip on market activity. Firms impacted by the ban are restricted from selling more shares than they buy during the first and last 30 minutes of trading. (Bloomberg)

3.

What profit? Shares in HSBC Holdings fell over 8% yesterday, after the bank reported that its quarterly profit plunged 80%. HSBC said the drop was largely a result of a USD3 billion charge on the value of its stake in a Chinese bank, in addition to another commercial real estate writedown. Q4 profits fell to USD1 billion from USD5 billion in the same period a year earlier, missing analysts’ expectations. CEO Noel Quinn attributed the Bank of Communications impairment to a “technical accounting adjustment,” and that HSBC forecasts the Chinese economy will expand by 4.9% this year. (Financial Times)

4.

Blue chip newcomer: Amazon is set to replace Walgreens Boots Alliance on the Dow Jones Industrial Average from next week. The index’s revision was prompted by Walmart’s decision to split its stock 3:1, which will reduce Walmart’s index weight. Dow Jones said that Amazon’s presence on the index reflects the “evolving nature of the American economy” and will increase consumer retail exposure as well as other business areas in the index. The Dow Jones is weighted based on the share price of its holdings rather than their market cap. (Bloomberg)(S&P Global)

5.

Mega mine: Rio Tinto has approved the world’s largest mining project, with the board giving the green light for a USD20 billion iron ore development in the Republic of Guinea, West Africa. The mining major will invest USD6.2 billion in the mine, rail and port project alongside at least seven other companies, five of which are from China. Rio Tinto’s underlying profit fell 12% during 2023 to USD11.8 billion. CEO Jakob Stausholm said in a press release on the company’s results yesterday that its net impairment charges of $700 million for the period were related largely to its Australian alumina refineries. (Financial Times)(Bloomberg)

6.

Au revoir to Aussie CSR: French building materials giant Saint-Gobain is pursuing a takeover of CSR Limited, confirming its bid for the company at $9 per share. The offer values CSR at $4.3 billion, and is a 33% premium to CSR’s Tuesday close of $6.77. Paris-based Saint-Gobain has a current market value of €35 billion, having climbed 29% over the past year. CSR is working with bankers from UBS and Herbert Smith Freehills lawyers on the transaction, while Saint-Gobain is receiving advice from Barrenjoey. (AFR)

7.

Chip race: Intel expects to overtake its biggest advanced chip-manufacturing rival, Taiwan Semiconductor Manufacturing Company (TSMC) before its 2025 deadline. The tech giant says that it will once again become the producer of the world’s fastest chips later this year with its Intel 18A manufacturing technology, further extending that lead in 2026 with new technology called Intel 14A. Intel has historically built chips for its own use, but when the company lost its manufacturing lead, its less-competitive chips lead to margin depletion. Intel is now banking on potentially billions in US government subsidies to drive the new advances. (Reuters)

8.

Rates payday: Hedge fund Rokos Capital Management has banked USD1 billion in profits this year after a savvy bet on US interest rates. The fund profited this year as markets, which in December had been anticipating up to six quarter-point rate cuts throughout 2024, recognised that rate cuts would not be so large nor arrive so quickly. Chris Rokos’ fund is already up 8.8% in 2024 according to sources cited by the Financial Times, gains which have reportedly been driven by the recent bond market sell-off. (Financial Times)