Markets are hoping for evidence that will solidify a brightening global economic outlook, though rising trade tensions are casting a cloud, while G7 finance ministers gather in Italy.
AI darling Nvidia reports results, London has its sights on a revival in stock listings, while New Zealand’s central bank is stuck in a rut between lacklustre growth and sticky inflation.
Here’s your look at what’s happening in markets this coming week:
CLOUDS ON HORIZON
Upcoming May business activity numbers from big economies should reinforce a brighter global economic outlook.
A slow euro area recovery appears to be underway after six straight quarters of stagnant or negative growth, U.S. inflation just resumed its downward trend and China grew faster than expected in Q1. So, global PMIs should stay on the right side of the 50 divider between expansion and contraction.
Yet steep U.S. tariff increases on Chinese imports from electric vehicle batteries to computer chips highlight a fragile outlook for global trade and growth. China vows retaliation.
Manufacturers in Germany, Europe’s biggest economy, are already experiencing shifts in world trade and geopolitics. Heightened trade tensions – with a U.S. election looming – could hurt them further, upend China’s recovery and reignite U.S. inflation.
Global PMIs are pointing up for now. But that could easily change.
CHIP TIME
Nvidia’s quarterly results on Wednesday could set the tone for U.S. stock markets and reverberate through companies exposed to the burgeoning artificial intelligence field.
The semiconductor company at the centre of the excitement over AI’s business potential is expected to report a massive jump in revenue and profit for its fiscal first quarter.
Revenue is expected to rise to US$24.8-billion, from US$7.2-billion a year earlier, with earnings per share soaring to US$5.57 from US$1.09, according to LSEG data.
Nvidia may need to meet those lofty expectations and then some to keep its soaring stock price moving higher. Shares have jumped over 90 per cent this year after more than tripling in 2023, making the AI darling the third-largest U.S. company by market value.
SHEIN AND SPARKLE
Reports on the diminished status of London’s stock market have been aplenty: Europe’s most popular listing venue during the 2021 boom has been home to just 1 per cent of all European IPO volumes year-to-date, according to Dealogic.
Could this be about to change? A string of household names have emerged as potential London listing contenders.
Chinese fast fashion brand Shein is stepping up preparations for a potential London float that could be the venue’s largest ever if it’s valued at US$66-billion. Diamond firm De Beers is another that might bring some sparkle.
A positive driver is the improved global fund flows.
WATCH, WORRY AND WAIT
The central bank that was at the forefront of monetary policy shifts globally has been forced to take a back seat in bringing interest rates down from painful multi-year peaks.
The Reserve Bank of New Zealand, expected to leave rates unchanged on Wednesday for a seventh consecutive meeting, was the first major monetary authority to ease at the start of the pandemic, and the first to hike in the aftermath.
But sticky inflation and a flatlining economy keeps the RBNZ in the “watch, worry and wait” stance it adopted a year ago.
Market wagers for an eventual cut in October put it behind the ECB, which is expected to move in June, followed by the BoE in August and the U.S. Fed in September. Switzerland and Sweden have started easing.
The RBNZ itself is even less optimistic, projecting no lowering of rates until next year.
FROZEN ASSETS
Finance chiefs from the Group of Seven major democracies will back a European Union plan to use the income from frozen Russian assets to help Ukraine’s war effort at a May 24-25 meeting, according to Italy, which holds the rotating presidency of the group.
The prospect of more funding potentially in the near future comes at a critical time for Ukraine, which faces a new Russian offensive in the northeastern Kharkiv region.
The G7 froze some US$300-billion worth of financial assets soon after Moscow’s attack on its neighbour in February, 2022 – and has debated since then whether and how to use the funds to help Ukraine. While Washington has proposed seizing the assets in their entirety, Europe has balked at that push, citing risks to the euro and legal repercussions.
Italy has said it will also try to revive an international deal on how to share taxing rights on large corporations which the United States is struggling to ratify in Congress.
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