©Reuters. FILE PHOTO: Passers-by pass an electric monitor showing Japan’s Nikkei stock average and recent movements outside a bank in Tokyo, Japan, March 22, 2023. REUTERS/Issei Kato/File Photo
By Herbert Lash and Marc Jones
NEW YORK/LONDON (Reuters) – Nvidia’s impressive AI prospects triggered a wave of global record highs in stock markets on Thursday, including the first new peak since 1989, but bond yields are mostly increased as economic data maintained immediate hopes of an interest rate hike. cuts at bay.
The Wall Street benchmark and European pan-regional index also hit new record highs as shares of Nvidia (NASDAQ:) jumped 15.2% and sent AI-related chip stocks soaring in Worldwide.
Domestic stock markets in Frankfurt and Paris also hit new highs, while Chinese stocks overnight extended their winning streak to eight straight sessions.
Nvidia on Wednesday beat expectations for fourth-quarter revenue and expects a roughly threefold increase in first-quarter revenue on strong demand for its AI chips. Nvdia could add more than $200 billion in market capitalization if the day’s gains hold.
Artificial intelligence provides the means to boost productivity that economies have struggled to raise for two decades, said Thomas Hayes, president and managing member of Great Hill Capital LLC in New York.
“What Nvidia represents is the catalyst for the Roaring ’20s in terms of improving productivity, and as productivity increases, it keeps a lid on inflation,” Hayes said.
MSCI’s index of global stocks gained 1.43%, while the pan-European STOXX 600 index closed 0.91% higher.
On Wall Street the increase was 0.73%, the S&P 500 gained 1.72% and the index added 2.46%.
The number of Americans filing new claims for unemployment benefits fell unexpectedly last week, indicating that job growth is likely to remain solid in February and reducing the urgency for the Federal Reserve to start cutting interest rates.
The rebound after hitting a three-week low earlier, as investors awaited new data to understand when the Fed is likely to start cutting interest rates.
The dollar index rose 0.038%, while the euro fell 0.04% to $1.0813.
The Nikkei has jumped nearly 17% already this year, with the S&P 500 and Nasdaq up about 5% each, driven largely by expectations for artificial intelligence, with Nvidia’s chips at the center of the boom .
Thursday’s record-breaking numbers include Tokyo Electron up 6%, chip test equipment maker Advantest up 7.5% and another chip-related stock, Screen Holdings, up more than 10% .
“It took about 34 years for the Nikkei to reach this record high, but it was all due to strong earnings improvements,” said Nick Nelson, global equity analyst at Absolute Strategy.
There was a big difference from the last time the Nikkei peaked during its bubble, Nelson said. When the Nikkei peaked in 1989, stocks were valued at nearly four times what they are today, Nelson said.
Eurozone yields fell to their highest in months as money markets pared their bets on European Central Bank rate cuts to less than 100 bps this year after Fed minutes on Wednesday showed policymakers they were worried about acting too soon.
The ECB’s latest minutes showed its decision-makers showed patience, while new PMI data showed the downturn in euro zone economic activity eased in February.
The two-year U.S. Treasury yield, which generally moves in lockstep with interest rate expectations, rose 5.6 basis points to 4.709%.
The yield remained unchanged at 4.323% as bonds with longer durations remained flat.
While most Fed policymakers said they were concerned about the risks of cutting too soon, according to meeting minutes, there is still broad uncertainty about how long borrowing costs are expected to remain at their current high level. .
This has strengthened the belief among traders that any rate cut is not imminent, with market prices suggesting a one-in-three chance for a first rate cut in May, according to CME Group (NASDAQ:)’s FedWatch Tool.
Oil prices stabilized as a sharp rise in supplies offset the sustaining impact of another attack on shipping near Yemen.
U.S. crude recently rose 0.82% to $78.55 a barrel and settled at $83.54, up 0.61% on the day.