Time to wrap up….

Shares in Nvidia have jumped 3% in early trading, as the AI chipmaker recovers some ground after three days of big losses.

Today’s rally lifts Nvidia’s value by around $90bn, back to almost $3trn.

Over half a trillion dollars had been knocked off Nvidia’s value in recent days, before today’s tentative recovery, shortly after it became the world’s largest company last week.

Brussels has accused Microsoft of anti-competitive behaviour by bundling its Teams app with its Office suite, potentially teeing up a large fine for the software giant:

US consumer morale has dropped this month, a new survey shows, but was stronger than expected.

The Conference Board’s consumer confidence index dipped in June to 100.4, down from 101.3 in May. Economists had expected it would fall more, to exactly 100.

The decline was due to a deteriorating short-term outlook for income, business, and conditions in the jobs market.

Dana M. Peterson, chief economist at The Conference Board, explains:

“Confidence pulled back in June but remained within the same narrow range that’s held throughout the past two years, as strength in current labor market views continued to outweigh concerns about the future.

However, if material weaknesses in the labor market appear, Confidence could weaken as the year progresses.”

Ding Ding goes the Wall Street opening bell….. and Nvidia shares have opened higher.

Nvidia has jumped 2.8% in early trading, to $121.46, up from $118 last night, after losing over $500bn in a dramatic tumble over the last three sesssions.

As flagged this morning, technical analysts had indicated that Nvidia’s shares could have support at $115.

They hit an alltime high of $140 last week, when Nvidia surged to become the world’s most valuable company, before starting to lose ground on Thursday.

HSBC and Barclays are cutting rates on their fixed mortgage deals in what some brokers claim could be the start of a “summer of savings” for homebuyers and those looking to remortgage.

Barclays has reduced rates by more than 0.25 percentage points in some cases from Tuesday, and its cuts led to a quick response from HSBC, which said it would be cutting rates across its home loans range with effect from Wednesday.

While new home loan rates have been broadly stable over the last month or two, the pricing of some deals has crept up. However, recent improvements to money market swap rates – which largely determine the pricing of new fixed deals – appear to have prompted two of the biggest mortgage lenders to reduce their rates, with others predicted to follow suit.

More here:

Human rights organisation Amnesty International has hit out at plans for China’s fast fashion group Shein to float on the London Stock Exchange.

It emerged yesterday that Shein has confidentially filed for a public listing in London, which could value the company at around £50bn.

This would be London’s biggest ever float.

But Dominique Muller, Amnesty International researcher specialising in the garment industry, says the City should demand transparent and binding safeguards regarding human rights standards, before admitting Shein to the fold:

​“It’s deeply troubling that a company with questionable labour and human rights standards and an unsustainable fast fashion business model could be set to reap hundreds of millions of pounds via a sale of shares and a listing on the London Stock Exchange.

“Where SHEIN goes, others will try to follow. The UK authorities and the London Stock Exchange should not facilitate SHEIN’s listing until transparent and binding safeguards regarding internationally accepted human rights standards covering its entire supply chain are agreed and applied, and any abuses identified fully remedied.

“Rewarding SHEIN’s current methods via a flotation would be a badge of shame for the London Stock Exchange, the bankers helping bring it to market, and any investors set to profit from it. It would be an appalling example of a process which delivers for the rich by squeezing the poor. It validates the view that it is acceptable to regard workers and their rights, company products and the environment as expendable – which cheapens us all.

“It is essential the new UK government does not allow a race to the bottom in terms of corporate and human rights standards. It should require companies to prevent serious environmental harms and human rights abuses occurring throughout their entire operations and supply chains. It should enable workers whose rights are abused by company activities anywhere in the world recourse to justice through UK courts.”

Shein has been accused of using forced labour to make its affordable clothing, such as t-shirts and sweaters.

The Mail on Sunday reported last weekend that Shein may scrap its London float plans, amid growing disquiet in Beijing over the way the fast-fashion retailer is portrayed in the UK.

A US central bank policymaker has indicated she would be open to raising interest rates if inflation not fall as hoped.

In a speech in London today, Federal Reserve governor Michelle Bowman also said the time is not right yet to start lowering borrowing costs.

Bowman explained:

Should the incoming data indicate that inflation is moving sustainably toward our 2% goal, it will eventually become appropriate to gradually lower the federal funds rate to prevent monetary policy from becoming overly restrictive.

However, we are still not yet at the point where it is appropriate to lower the policy rate. In my view, we should consider a range of possible scenarios that could unfold when considering how the FOMC’s monetary policy decisions may evolve.

I remain willing to raise the target range for the federal funds rate at a future meeting should progress on inflation stall or even reverse.

Last month, US consumer price inflation fell to an annual rate of 3.3%, down from 3.4% in April.

The owner of the Vauxhall, Peugeot and Citroën brands has warned its car plants in Ellesmere Port and Luton could close unless market demand for electric vehicles and “stupid” regulatory conditions change.

The UK managing director of Stellantis said the company did not want to shut operations in the UK but it would make a decision in “less than a year” in the face of unreasonable government sales quotas and lack of consumer incentives in relation to VAT on vehicles and electricity.

Maria Grazia Davino said today:

“You have to make strategies that are based on efficiency. I want to keep the production [in the] UK and I want to be clear on this.”

She added that the demand for electric vehicles was “soft” and unless there were further incentives for businesses to buy the electric commercial vehicles or more support from the government it may have no choice.

Tesla is recalling more than 11,000 Cybertruck electric vehicles, due to problems with the windscreen wiper motor and the trunk bed trim seal,

Marketwatch reports:

The National Highway Traffic Safety Administration acknowledged Tesla’s TSLA notification of both matters in letters dated Monday. The wiper issue potentially impacts 11,688 2024 Cybertruck units, while the trunk-bed trim issue could affect 11,383 units of the 2024 model.

The recalls are the latest setback for the vehicle whose mass production is expected to start next year, points out Reuters:

Big tech news from Brussels: Microsoft has been accused of anti-competitive behaviour by the European Commission for bundling its Teams app with its Office 365 and Microsoft 365 software suites.

The EC says it is concerned that, since at least April 2019, Microsoft has been tying Teams with its core software-as-a-service (SaaS) productivity applications.

This, it fears, has restricted competition on the market for communication and collaboration products and defending its market position in productivity software and its suites-centric model from competing suppliers of individual software.

The Commission explains:

In particular, the Commission is concerned that Microsoft may have granted Teams a distribution advantage by not giving customers the choice whether or not to acquire access to Teams when they subscribe to their SaaS productivity applications. This advantage may have been further exacerbated by interoperability limitations between Teams‘ competitors and Microsoft’s offerings. The conduct may have prevented Teams’ rivals from competing, and in turn innovating, to the detriment of customers in the European Economic Area.

If confirmed, these practices would infringe Article 102 of the Treaty on the Functioning of the European Union (‘TFEU’), which prohibits the abuse of a dominant market position.

Today’s Statement of Objections comes almost a year after the EC launched an antitrust investigation into Microsoft’s bundling of its Teams video and chat app with some of its other products.

The Commission says that after it began its investigation, Microsoft introduced changes in the way it distributes Teams, and started offering some suites without Teams.

However, the Commission has preliminarily found that these changes are insufficient to address its concerns and that “more changes to Microsoft’s conduct are necessary to restore competition”.

Whoever wins next week’s general election will benefit from an improving economic climate, predicts Capital Economics.

They predict that interest rates will fall faster than forecast over the next 18 months, while economic growth will be pacier.

Capital Economics say:

The next government, which the polls ahead of the election on 4th July suggest will be a Labour one, will benefit from a combination of lower inflation, lower interest rates and faster economic growth than most are expecting.

We think that a fall in CPI inflation from 2.0% in May to around 1.5% by the end of this year will prompt the Bank of England to cut interest rates from 5.25% to 3.00% next year, rather than to 4.00% as investors expect. And the boost to activity from lower inflation and interest rates explains why we are more optimistic than most by expecting the economy to grow by 1.0% this year and 1.5% in both 2025 and 2026.

While tax revenues and public spending may both be a bit higher under a Labour government, the economy will probably tread a similar path over the next couple of years.

Our economics editor, Larry Elliott, explained last weekend that the economy Labour will (probably) take on is not quite as ravaged as some suggest….

The use of artificial intelligence to revolutionise scientific research and disease understanding is one of the top ten emerging technologies of this year.

So says the World Economic Forum, in a new report that highlights groundbreaking innovations that can tackle critical global challenges within the next 3 to 5 years.

WEF’s Top 10 Emerging Technologies of 2024 are:

1. AI for scientific discovery: While artificial intelligence (AI) has been used in research for many years, advances in deep learning, generative AI and foundation models are revolutionizing the scientific discovery process. AI will enable researchers to make unprecedented connections and advancements in understanding diseases, proposing new materials, and enhancing knowledge of the human body and mind​​.

2. Privacy-enhancing technologies: Protecting personal privacy while providing new opportunities for global data sharing and collaboration, “synthetic data” is set to transform how information is handled with powerful applications in health-related research.

3. Reconfigurable intelligent surfaces: These innovative surfaces turn ordinary walls and surfaces into intelligent components for wireless communication while enhancing energy efficiency in wireless networks. They hold promise for numerous applications, from smart factories to vehicular networks​​.

4. High-altitude platform stations: Using aircraft, blimps and balloons, these systems can extend mobile network access to remote regions, helping bridge the digital divide for over 2.6 billion people worldwide​​.

5. Integrated sensing and communication: The advent of 6G networks facilitates simultaneous data collection (sensing) and transmission (communication). This enables environmental monitoring systems that help in smart agriculture, environmental conservation and urban planning. Integrated sensing and communication devices also promise to reduce energy and silicon consumption.

6. Immersive technology for the built world: Combining computing power with virtual and augmented reality, these technologies promise rapid improvements in infrastructure and daily systems​. This technology allows designers and construction professionals to check for correspondence between physical and digital models, ensuring accuracy and safety and advancing sustainability.

7. Elastocalorics: As global temperatures rise, the need for cooling solutions is set to soar. Offering higher efficiency and lower energy use, elastocalorics release and absorb heat under mechanical stress, presenting a sustainable alternative to current technologies.

8. Carbon-capturing microbes: Engineered organisms convert emissions into valuable products like biofuels, providing a promising approach to mitigating climate change.

9. Alternative livestock feeds: protein feeds for livestock sourced from single-cell proteins, algae and food waste could offer a sustainable solution for the agricultural industry.

10. Genomics for transplants: The successful implantation of genetically engineered organs into a human marks a significant advancement in healthcare, offering hope to millions awaiting transplants​​.

Here’s the full report.

Back in the future’s market…. Nvidia’s shares price is now rallying!

It’s currently up 2.5% in pre-market trading, at $121, having initially been on track for a 2% fall.

Wall Street opens at 2.30pm UK time (or 9.30am in New York), so we’ll see if it can hang onto these gains…..

Nvidia’s shares are on track for further losses when Wall Street opens in five and a half hours time.

Pre-market trading has just opened, and they’re down 2.1% at $115.64, on track for a fourth day of losses, pulling Nvidia deeper into a correction.

That would leave its shares slightly above the short-term support level identified by traders (see earlier post).

Elsewhere in the markets, European aerospace giant Airbus has tumbled 9% this morning after cutting its profit forecasts last night.

Investors are ditching Airbus after it warned of persistent supply chain disruptions and challenges in its space business last night.

Airbus now expects to make around 770 commercial jets this year, down from a previous target of 800, saying:

In commercial aircraft, Airbus is facing persistent specific supply chain issues mainly in engines, aerostructures and cabin equipment.

Airbus is also taking a €900m charge at its Space Systems, after discovering “further commercial and technical” challenges.

It adds:

These are mainly related to updated assumptions on schedules, workload, sourcing, risks and costs over the lifetime of certain telecommunications, navigation and observation programmes.

After a three-day slide, financial traders are wondering how much further Nvidia’s shares may fall.

Bloomberg reports that traders are turning to technical analysis for clues on where the bottom may be.

Yesterday’s 6.7% drop took Nvidia’s share price down to $118, having briefly hit an alltime high of $140 last week.

Buff Dormeier, chief technical analyst at Kingsview Partners, sees short-term support around the $115 level, with the next significant level at $100.

These support levels are calculated by using Fibonacci retracement levels, using stock price data to work out where a stock might have support on the way down, or face resistance on the way up.

Ari Wald, head of technical analysis at Oppenheimer, points out that Nvidia’s longer-term trend remains strong – the stock is still trading well above its 50-day moving average around $101 and 100-day moving average at $92.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Nvidia, one of the hottest shares on the market this year, has dropped into a correction – leaving traders worrying that the air is coming out of the AI stock boom.

After three days of chunky falls, Nvidia’s stock has now dropped by 13% since – briefly – becoming the world’s largest company a week ago.

Yesterday it tumbled by 6.7% on Wall Street, taking its losses over the last few days to over $500bn(!).

That’s the biggest three-day value loss for any company in history, Bloomberg reports.

Nvidia’s falls pulled the wider market down too, as Jim Reid of Deutsche Bank explained this morning:

Nvidia has been driving markets again over the last 24 hours, as its share price came down another -6.68%, building on its -4.03% decline over the previous week and -16.1% from the intra-day high on Thursday.

In turn, that held down US equity returns more broadly, as the losses for Nvidia pushed the NASDAQ (-1.09%) and the S&P 500 (-0.31%) into negative territory for the day.

Nvidia’s share price falls follow a stellar run – the stock is still up almost 140% in 2024, and has almost tripled over the last 12 months.

The rally had been driven by excitement about artificial intelligence systems, which are powered by Nvidia’s high-end chips.

But some analysts had been concerned that the AI boom had run too high, and was turning into a bubble.

David Morrison, senior market analyst at Trade Nation, says there are signs of profit taking by investors who bought shares in “Market darling Nvidia” on the way up:

Some profit-taking seems entirely reasonable given NVIDIA’s meteoric rise. The stock was up over 180% this year alone. But if it continues to lose ground, then there’s a danger of contagion, with selling spreading to other big tech names. If that were the case, then the market could be in for a deeper and more protracted pull-back.

Yet there are few indications that investors are even thinking along these lines.

Nvidia has been posting very impressive financial results this year. In the last quarter, revenues surged by 262% year-on-year, with earnings per share up a staggering 629%.

But the enthusiasm for Nvidia’s stock this year had pushed its valuation to levels that implied it would keep beating expectations with stellar revenue and earnings.

Another factor weighing on Nvidia is that CEO Jensen Huang has been selling stock this month, through a trading plan. That has focused attention on whether the stock was somewhat overvaued.

Another point: we’ve approaching the end of the financial quarter – so some investors will be rebalancing portfolios and cashing in profits.

Kyle Rodda, senior financial market analyst at capital.com, explains:

It’s difficult to extrapolate what can be attributed to technical factors and what’s fundamentals in the markets, with price action apparently driven by end-of-month and end-of-quarter positioning.

A sell-down in tech, despite little shift in rates expectations and the outlook for earnings, may signal a trimming by investors of the quarter’s big winners. Nvidia epitomises the dynamic, down 12% in three days and little-to-news.

The agenda

• 1.30pm BST: Chicago Fed National Activity Index for May

• 1.30pm BST: Canadian inflation report for May

• 2pm BST: US house price index for April

• 3pm BST: US consumer confidence report for June