A look at the day ahead in U.S. and global markets from Mike

Dolan

Nvidia's ( NVDA ) post-bell earnings update on Wednesday is keeping

stock markets everywhere in a holding pattern, while U.S.

Treasury markets appear to be absorbing the latest torrent of

debt sales quite comfortably.

The wait for the world's most dominant artificial

intelligence chipmaker's earnings has sucked all the oxygen out

of the early part of the week, so large now is the influence of

the $3.1 trillion-valued firm on wider stock indexes.

Equity options traders are expecting Nvidia's ( NVDA )

report to spark a more than $300 billion swing in its shares

over the day ahead. Pricing anticipates a stock move of almost

10% on Thursday - larger than the expected move ahead of any

Nvidia ( NVDA ) report over the last three years.

The stock gained more than 1% on Tuesday and was marginally

higher in out of hours trading early on Wednesday. S&P500 and

Nasdaq futures held steady.

The stakes are higher than ever, given the recent creeping

doubts about AI overspend and the lack of end product so far for

the new tech. Apple's planned announcement on Sept. 9 of a new

iPhone with new AI functionality, however, may ease some of

those concerns.

And it's a big earnings day more broadly for Big Tech - with

Salesforce ( CRM ) also reporting and CrowdStrike ( CRWD ) updating following a

July flub that sparked a worldwide computer outage.

But while the S&P500 has stopped short of new record

highs awaiting the Nvidia ( NVDA ) results, the market remains buoyant

with the Federal Reserve now finally set to cut interest rates

in three weeks' time.

Nowhere has that been clearer than in the ease with which

Treasury sold another $69 billion of two-year notes

on Tuesday. Demand was stronger than forecast and, at 3.86%

early on Wednesday, 2-year yields are eyeing 15-month lows.

Another $70 billion of 5-year paper hits the street later

today, with the total of bills and coupons up for grabs this

week alone surpassing half a trillion dollars.

Treasury is frontloading the new debt in short maturities

and almost three quarters of that huge total this week is in

bills with tenors of less than 12 months - a move that will see

some benefit to debt servicing costs as Fed rates tumble.

But the good reception for the new two-year notes and with

one eye on how all those bills eventually get refinanced over

the years ahead, the inverted yield curve between two and 10

years narrowed to just 3 basis points - its smallest in three

weeks.

The latest U.S. economic releases provide little bar to

those souped-up easing expectations - now running at as much as

104 basis points over the remainder of the year.

Although consumer confidence rose to a six-month high in

August, Americans are becoming more anxious about the labor

market - the cooling of which is now front and center of the

Fed's focus.

And despite multiple supply anxieties from the Middle East

to Libya, oil prices were on the wane again on Wednesday

- and still clocking year-on-year losses of more than 5%.

The dollar was pretty mixed on all that. Its DXY index

was a touch higher as the euro retreated following

some soft euro zone lending data and expectations that the

European Central Bank will now cut for the second time next

month before the Fed even gets going.

Dollar/yen was a touch firmer despite relatively

hawkish Bank of Japan comments. BOJ Deputy Governor Ryozo Himino

restated the central bank's intention to continue lifting

interest rates if inflation stayed on course, while closely

monitoring financial market conditions.

In politics, the latest national opinion polls continue to

show Vice President Kamala Harris marginally ahead of challenger

Donald Trump and she remains favorite to win at bookmakers -

with the latest Reuters/Ipsos poll showing her also ahead on her

economic policy stance.

Harris and running mate Tim Walz are expected to interview

with CNN TV on Thursday.

Trump, meantime, faced a revised federal indictment on

Tuesday accusing him of illegally trying to overturn his 2020

election loss, with prosecutors narrowing their approach after a

U.S. Supreme Court ruling that former presidents have broad

immunity from criminal prosecution.

In Europe, British Prime Minister Keir Starmer warned on

Tuesday of a 'painful' budget ahead and travelled to Berlin on

Wednesday to meet German Chancellor Olaf Scholz.

Sterling has been buoyed since before Labour's recent

election win in part on expectations the new government will

ease relations with former European Union partners and seek to

soften some of the economically-damaging post-Brexit agreement.

Key developments that should provide more direction to U.S.

markets later on Wednesday:

* Federal Reserve Board Governor Christopher Waller in India and

Atlanta Fed President Raphael Bostic speaks

* US corporate earnings: Nvidia ( NVDA ), Salesforce ( CRM ), CrowdStrike ( CRWD ), HP,

NetApp ( NTAP ), JM Smucker, Cooper Companies ( COO ), Bath & Body Works ( BBWI )

* US Treasury sells $70 billion of 5-year notes, sells two-year

FRNs

(By Mike Dolan, editing by Gareth Jones

[email protected])