Good morning, and welcome to Friday's market commentary. Yesterday was a challenging day for the markets, with significant declines across major indices despite the initial boost from NVIDIA's strong earnings report on Wednesday. NVIDIA exceeded expectations with an EPS of 6.12 and $26 billion in revenue, which initially led to a nearly 10% rise in the stock on Thursday. However, broader market concerns led to a bearish session, overshadowing NVIDIA's positive news.
Today, UK retail sales data was a significant disappointment, coming in at -2.3% instead of the expected -0.5%. This worse-than-expected figure has put immediate pressure on the British pound, which is experiencing selling pressure as a result. The data underscores the ongoing challenges in the UK retail sector and adds to the negative sentiment surrounding the pound.
Geopolitically, tensions are heightened with China and Taiwan conducting military drills. This development adds a layer of global market anxiety, as traders remain cautious about the potential for escalating conflicts. Such geopolitical tensions often lead to increased volatility and risk aversion in the markets.
In the currency markets, the American dollar and euro are showing strength, benefiting from a flight to safety amid global uncertainties. On the other hand, the Australian dollar, Swiss franc, and New Zealand dollar are weaker, reflecting mixed economic signals and risk-off sentiment. The geopolitical concerns and disappointing UK data are contributing to these currency movements.
Commodities are attempting to recover from significant declines earlier in the week. Oil prices have dropped sharply and are currently testing long-term horizontal support levels. For WTI, this critical support is around $76-$77 per barrel. Precious metals, which also saw sharp declines after reaching new long-term highs, are trying to initiate a small reversal today. However, the overall outlook remains cautious, with the potential for further corrections.
Looking ahead, today's key economic data releases include retail sales from Canada, US durable goods orders, and the revised University of Michigan consumer sentiment index. These data points will be closely watched for further market direction and could influence trading sentiment heading into the weekend.