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

Dolan

Wall Street's tech-led stock surge to new records has seen $3

trillion AI-champion Nvidia ( NVDA ) replace Apple ( AAPL ) as

the world's 2nd most valuable company in a market infused with

interest rate cut excitement across the G7.

With the European Central Bank set to follow the Bank of

Canada on Thursday with its first interest rate cut of the

cycle, four countries of the G7 economic bloc will be in easing

mode - with two more coming down the pike later this year.

Balancing them all, currency markets are taking it on the

chin - with the euro and Canadian dollar relatively

serene on the foreign exchanges despite the moves.

That's mainly because Federal Reserve rate cut speculation

is stirring again too. Having gone from pricing at least 6 cuts

in 2024 at the start of the year to just one last week, Fed

futures markets are now settling on two quarter-point reductions

- starting in September before the election.

A sweep of U.S. labor market reports this week support the

argument that the economy is cooling, with the nationwide

payrolls update on Friday set to be the decider and with updates

on weekly jobless claims and May layoffs due on Thursday.

But the report that really catalyzed the latest equity surge

to new records was the ISM service sector survey for last month

that both doused concerns about a stalling of the economy and

encouraged hopes for ongoing disinflation.

Although sister surveys for manufacturing show sign of

spluttering, the service sector bounced back sharply in May,

with its 'prices paid' component easing and employment reading

still in contraction.

Something for everyone perhaps - certainly enough to

catapult the S&P500 and Nasdaq to new all-time

highs in its best day for over a month and drag 10-year Treasury

yields to their lowest since April 1.

The VIX 'fear index' is subdued below 13 and S&P

futures held the gains ahead of Thursday's bell.

The scores going into the half-year point are 2024 gains to

date of over 12% for the S&P500, more than 14% for the Nasdaq

and 4.5% for the equal-weighted S&P.

All that shows is that tech and its relentless artificial

intelligence theme are dominating once again.

Bagging a $3 trillion market cap price-tag for the first

time that leaves it second only to Microsoft ( MSFT ) following

a 147% stock surge this year, Nvidia ( NVDA ) hit new highs and pulled

all the AI complex of firms up with it.

Part of the latest scramble is because Nvidia ( NVDA ) is preparing

to split its stock ten-for-one, effective on Friday, and those

holding stock at the market close today will qualify for nine

additional shares in the chip group.

In a possible shot across the bows, however, the New York

Times reported that the U.S. Justice Department and the Federal

Trade Commission have reached a deal that allows them to proceed

with antitrust investigations into the dominant roles that

Microsoft ( MSFT ), OpenAI and Nvidia ( NVDA ) play in the AI industry.

Other earnings-related surges included gains of more than

10% on Wednesday for cybersecurity firm Crowdstrike ( CRWD ) and

Hewlett Packard Enterprise ( HPE ), with the latter flagging

strong demand for its AI servers.

But the tech fizz wasn't just on Wall Street. Shares in

Dutch chip equipment giant ASML also climbed after

reports it was nearing an agreement with Taiwan's TSMC

on providing it with its most advanced machines later this year.

Aided by ECB rate cut optimism, European stocks

gained almost 1% on Thursday - with its tech sector up

2% to its highest since December 2000 and German software leader

SAP up 4.5%.

In a well-flagged move, the ECB is expected to cut borrowing

costs by 25 basis points from 4% and President Christine

Lagarde's remarks on the trajectory from here will now be in

focus. Money markets are pricing in 64 bps of cuts this year -

suggesting possibly two more after today.

With European Parliament elections kicking off in the

background, European government bond yields were

steady ahead of the ECB decision.

Stocks were higher across Asia too, with Taiwan

outperforming with gains of almost 2% on the tech buzz and

mainland China underperforming yet again in the red.

Key diary items that may provide direction to U.S. markets later

on Thursday:

* European Central Bank policy decision, press briefing

* US May Challenger layoffs data, weekly jobless claims, April

international trade balance; Canada April trade

* US Treasury Secretary Janet Yellen gives keynote remarks at

Financial Stability Oversight Council in Washington

* US Treasury sells 4-week bills

* US corporate earnings: JM Smucker

* European Parliament elections kick off

(By Mike Dolan, editing by Christina Fincher,

[email protected])