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London stocks were trading relatively flat going into the close on Wednesday as investors eye results from US chip maker Nvidia.
In UK equity markets, banks were under the cosh amid speculation of a potential windfall tax on the sector. NatWest, Barclays and Lloyds were all down after the Financial Times cited a former senior Whitehall official as saying that banks could be targeted in the October budget. The FT said the official suggested a levy could raise several billions of pounds.
There is a lot of speculation as to where Labour will find the money they need to implement their changes and banks do seem a likely option. If they take from companies then few voters will kick back. Having said income and national insurance taxes will remain the same, they are limited as to who they can take from. Large corporates unpopular with voters have a large target on their backs.
However, this is also contrary to their economic growth goals. Companies won’t look to the UK if the government becomes known for randomly taxing those who make money. All will be revealed in October.
Precious metals producer Hochschild Mining slumped once again even as the company reiterated its output guidance. This is despite operations at its newly opened Mara Rosa mine running slowly as it swung into profit for the first half of the year on the back of rising commodity prices, lower costs and a reduction in impairment charges.
GSK gained as it said the Delaware Supreme Court would review a previous decision allowing expert evidence in the Zantac litigation, an important step in the company’s defence against claims that the drug causes cancer.
Prudential reversed earlier losses to trade up as it said it was on track to hit its medium-term profit targets after a solid first half and announced an acceleration in sales momentum since the period-end.
New business profit totalled $1.47bn in the six months to 30 June, which was 8% higher than last year when excluding the effect of interest rate and other economic impacts.
US stocks fluctuated in a tight range just a few hours ahead of results from Nvidia, the last of the so-called Magnificent Seven megacaps to report.
The chipmaker at the heart of the artificial-intelligence revolution will show whether it can once again shatter sales expectations. The bar is high for the company that boasts the best performance in the S&P 500 this year.
Analysts, on average, are predicting Nvidia will project revenue growth of more than 70% for the current quarter. Investors will be particularly keen to know how chief Jensen Huang sees demand developing into 2025.
Due to its uncontested leadership in AI, Nvidia’s market capitalization has ballooned to more than $3 trillion. Given its massive influence on broader indexes, the reaction to its results could drag the whole market up or down with it.
Options trading implies a nearly 10% move in either direction on the day following the results. A potential 10% (in either direction) shows the uncertainty and volatility that comes with investing in big tech. 10% on $3 trillion dollars means the market believes the company could potentially be worth either $300 billion more, or $300 billion less after the announcement at 22.00 GMT tonight but it doesn’t know which!
Of course, there is a chance earnings come in around expectations………but will traders let that get in the way of a wild ride? However, even that might cause a big movement according to Quincy Krosby at LPL Financial who said ‘meeting expectations may not be enough to underpin the share price,” she said.
“There’s the issue of the delay in chip sales based on the advanced Blackwell construction that needs to be addressed, and questions as to whether companies can monetize their AI capabilities after allocating billions for their AI infrastructure buildout.”
Throughout its history as a public company, the stock has averaged a one-day move of 8.1% in reaction to earnings. Besides Meta, the only other stocks that have experienced average one-day moves of more than 5% in reaction to earnings were Tesla and Alphabet.
Is this gambling, or trading?
So far this week trading volume has been down markedly as Labour Day weekend approaches, but that is all about to change.
The S&P 500 was down around -0.6% at the time of writing near 5,590. Trading volume was 35% below the average of the past month. Nvidia was already down around 4% as the market is feeling the jitters of Super Micro Computer which sank over 20% after saying it will delay filing its annual financial disclosures.
Warren Buffett’s Berkshire Hathaway continued its run and topped $1 trillion for the first time. It would seem that letting someone else do the picking for you is currently in favour (and no, he does not own any Nvidia shares, not directly anyway).
More from us at the weekend when we’ll discuss the impact of tonight's earnings. Good luck to all those who are long Nvidia.
