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• UK inflation decline helps solidify Dec rate cut expectations 
• Nvidia earnings to dictate market sentiment after recent selloff
• Investors weigh up potential havens amid bubble concerns

Mainland European markets are heading lower once again this morning on a day that will be dominated by tech volatility given Nvidia earnings release due after the US close. Notably, the outlier in Europe comes from the UK, with the FTSE 100 gaining ground thanks to particular strength in the commodity space as precious metals regain ground. Meanwhile, this morning saw a welcome decline in UK inflation, with headline CPI falling from 3.8 to 3.6% on an annual basis. This marks the first decline since May, with headline inflation largely treading water over recent months. From a market perspective, we have seen GBPUSD fall into a new low for the week, with today’s inflation decline helping to drive December rate expectations up to 84%.

US futures are signalling a tentative move higher at the open, highlighting the hope that today’s Nvidia earnings could provide an end to the recent selling pressure. Traders have grown increasingly fearful around the reliance on the continued growth of a handful of huge tech names whose main source of income seems to be eachother. That was evident once again yesterday after Anthropic, Microsoft and Nvidia announced a deal that saw the AI startup buy $30 billion worth of cloud computing capacity. With concerns over what happens once the rampant hyperscaling phase comes to an end, today’s Nvidia earnings provide a welcome reality check over exactly what the state of play is right now. In part, the fears evident over recent weeks have been borne out of the question of what happens when growth slows and the revenues aren’t there, but for now the earnings seen from much of the Mag7 names highlight the fact that the spending remains incredibly strong. As such, should Nvidia continue to strengthen as expected, today could provide a reminder that perhaps the fears evident over recent weeks are based on something which is yet to come rather than currently in place.

From a wider perspective, the declines seen of late have brought about questions over whether to hide in the event of a tech collapse. The sheer weighting of the tech sector means that invariably a slump in big tech means the wider index will go with it. Meanwhile, those holding positions in seemingly unrelated industries will likely still see selling pressure as risk off sentiment pushes investors to reduce exposure across their portfolio. The obvious place to hide would be in the precious metal space, although the fact that gold has recently weakened alongside equities does highlight that there has been a positive correlation of late as traders treat it as a momentum trade rather than a haven. Nonetheless, with the Fed ending QT amid liquidity concerns, and Japanese yields hitting multi decade highs off the back of stimulus plans that will ramp up debt, the merits of gold are likely to find themselves back in the limelight before too long.

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