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

Dolan

While the inflation and interest rate world continues to throw

up unpleasant surprises, it's hard to imagine much of a shift in

major indexes on Wednesday as Nvidia's ( NVDA ) earnings drum

roll builds through the session before a post-bell release.

While it's slightly alarming to have just one firm hold an

entire stock market in thrall, the sheer weight of Nvidia ( NVDA ) in

indexes after another near doubling of its share price this year

underlines both its own importance as well as that of

artificial intelligence narrative at large.

Nvidia's ( NVDA ) stock now has a weighting of over 5% in the S&P 500

, accounting for 6.5% of the Nasdaq 100 and 20% of

the VanEck Semiconductor exchange trade fund.

Standing away from the AI torchbearer, the macro backdrop

has been less benign over the past 24 hours - even if differing

inflation pictures are emerging internationally.

Canada's ongoing disinflation surprised positively on

Tuesday and spurred June interest rate cut hopes there. But

plunging British headline inflation missed forecasts and seemed

to put the kibosh on market speculation about a Bank of England

move next month.

The Reserve Bank of New Zealand held its policy rates,

meantime, and gave some hawkish signals about potentially rising

'peak' rates.

With the Federal Reserve set the publish minutes of its

latest policy meeting later on Wednesday, the latest soundings

from Fed officials this week seem to throw cold water over any

remaining talk of a U.S. rate cut this summer.

On Tuesday, Fed governor Christopher Waller talked of

"several more months" of inflation monitoring before being able

to act. Cleveland Fed boss Loretta Mester referred to "a few

more months".

Boston Fed chief Susan Collins reckoned: "It's going to take

longer than I had previously thought."

The upshot is that Fed futures now don't fully price the

first quarter-point move until the November 7 meeting - two days

after the U.S. election.

Despite a fresh slippage in oil prices, U.S. Treasury

yields pushed back higher early on Wednesday - with two-year

yields at their highest in over a week. Wednesday's

upcoming 20-year bond auction probably hasn't helped.

But the April UK inflation miss also colored the darker bond

mood in Europe.

Even though headline annual consumer price growth of 2.3% is

almost a full percentage point below the March reading, and now

as close to the BoE's 2% target as makes no difference, it was

heavily influenced by big drop in household energy tariffs and

above the 2.1% forecast.

Worriers pointed to much higher services inflation last

month. And even though one-off annual price changes there may be

another distortion, 'core' UK CPI inflation is still running at

3.9% - even while annual producer output deflation is

simultaneously as deep as 1.6%.

The messiness of the overall picture may make the BoE

hesitate in easing for a bit longer and money markets

effectively wiped out the chances of a June rate cut from 50-50

before the release.

In what looks like a possible overreaction, an August cut is

now even seen to be in the balance. UK government bond yields

jumped to a three-week high and sterling hit its

highest in a month.

Elsewhere in Europe, markets shivered a bit on concerns

about an escalating tit-for-tat trade war between China and

other western economies.

European automakers fell 1.9% to a

more-than-three-month low, with shares of Mercedes-Benz

, BMW and Volkswagen falling.

China should raise its import tariffs on large

gasoline-powered cars to 25%, a government-affiliated auto

research body expert told China's Global Times newspaper as the

country faces sharply higher U.S. auto import duties and

possibly additional duties to enter the EU.

Back on Wall St, stock futures were marginally in the red

after notching modest gains on Tuesday. The dollar was firmer.

Global stock markets were slightly weaker.

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

on Wednesday:

* US April existing home sales

* US corporate earnings: Nvidia ( NVDA ), Target, Synopsys, Analog

Devices, TJX

* Federal Open Market Committee issues minutes from April

30-May 1 meeting; Chicago Fed President Austan Goolsbee speaks

* US Treasury sells 20-year bonds

(By Mike Dolan, editing by Christina Fincher,

[email protected])