Global stock markets were shaken once again on Thursday after news emerged that the CEO of chip giant Nvidia could be ousted, while U.S. Treasury yields touched 5% once more as traders bet on a Federal Reserve rate hike and the dollar climbed to a 19-month high.
European markets opened on a positive note, with the pan-European Stoxx 600 index, which carries relatively low weighting in technology stocks, setting a record high for the first time since August, even as markets elsewhere came under broad pressure.
Reports that Nvidia's board had met to discuss the future of chief executive Jensen Huang sent the company's U.S. premarket shares plunging nearly 7%, and Asian equities fell broadly overnight.
Several other sources of global market disruption resurfaced at the same time. Persistent tensions in the Middle East offset the effect of rising regional crude output, pushing Brent crude back above $92 a barrel, while the U.S. dollar rose to its highest level since last April following President Trump's "Liberation Day" tariff announcement.
After inflation data blew past expectations earlier this week, markets repriced expectations for a Fed rate hike next month, and the dollar has since appreciated by nearly 1.5%. According to the CME FedWatch tool, a week ago traders saw a one-in-three chance the Fed would hold rates steady; now market pricing shows a 90% probability of a 25 basis point hike and a 9.2% probability of a 50 basis point increase.
Societe Generale strategist Kit Juckes said: "The Nvidia affair has helped push the market into risk-off mode, which in turn has lifted the dollar." He added: "But the deeper driver is the huge shift in inflation expectations... the market is no longer sitting on the fence about whether there is an inflation problem."
Wall Street's anxiety
The bond market has felt the shift in expectations as well. With U.S. bond markets closed on Wednesday, the 10-year Treasury yield briefly touched 5% again during European trading hours. Momentum was relatively weak, however. The European benchmark, the German 10-year Bund yield, edged lower to 3.3%, but still recorded a weekly rise of about 5 basis points.
In contrast to European stocks hitting record highs, U.S. equity index futures fell 0.5% amid the Nvidia turmoil. Not long ago, Nvidia had been the most valuable company in the world.
Numerous reports said Nvidia's board met on Wednesday evening to discuss whether to remove CEO Jensen Huang, and The New York Times also reported that Huang had an extramarital affair with another Nvidia executive.
Jack Dolhead, chief executive of Longbow Asset Management in Tulsa, Oklahoma, said: "This looks bad from every angle." He added: "But I don't think the board will remove him until it finds a star successor who is a household name in tech circles. At the end of the day, don't forget that Nvidia's chips are the core pillar of the entire AI wave."
If Huang were to leave, it remains unclear who would take over as CEO. Meanwhile, shares of Chinese domestic GPU makers jumped on Thursday, buoyed by expectations that Nvidia's troubles would open up a larger market share for local chipmakers.
Saxo chief investment strategist Charu Chanana said the next key test will come with Nvidia's earnings next Tuesday. "Strong results may help reconsolidate the AI growth narrative, but they will be hard-pressed to fully eliminate the valuation discount caused by corporate governance concerns."
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