US, European Stocks Shrug Off Nvidia Slump To Rise On Rate Hopes

While Nvidia's earnings beat expectations in most areas, investors were left disappointed about the firm's outlook AFP

US and European stock markets rose Thursday as investors shrugged off a drop in shares of chip giant Nvidia and turned their attention back to expectations of lower interest rates.

Frankfurt hit a new record, and Paris and London also closed higher.

The main US stock indexes were all up even as Nvidia fell after the tech titan reported earnings that did not meet everyone's sky-high expectations.

After US markets closed on Wednesday, Nvidia said its sales more than doubled to $30 billion in the second quarter, but at a slower pace than in previous quarters, and that profits also doubled, to $16.5 billion.

Nvidia has become a bellwether for the tech sector owing to its huge role in the development of AI chips and its shares have risen more than 150 percent since the start of the year, accounting for a third of the broad-based S&P 500 index's gains.

Despite the impressive earnings, Nvidia's shares initially fell by as much as eight percent in after-hours trading Wednesday as some traders had hoped for even better results, and took advantage to lock in profits from its recent gains.

Nvidia shares were down around three percent at midday in New York on Thursday.

"Investors have become spoiled, expecting Nvidia not just to meet but obliterate expectations," said independent analyst Stephen Innes.

Charles Schwab strategist Joe Mazzola said the wider market shrugged off Nvidia's slump partly because almost all companies reporting earnings recently, including Nvidia, have beat analysts' sales forecasts.

Traders are now focused on a raft of economic indicators that could shed light on the possible size of expected rate cuts by the US Federal Reserve and the European Central Bank next month.

Federal Reserve chief Jerome Powell gave markets a boost last week when he declared that the central bank was ready to finally cut borrowing costs, which sit at a 23-year high.

Government figures showed Thursday that the US economy expanded more than initially thought in the second quarter, growing at an annual rate of 3.0 percent, up from 2.8 percent in an earlier estimate.

The GDP report helped to "reassure investors that the economy is not teetering on an economic cliff", said eToro US investment analyst Bret Kenwell.

Despite the revision, "the Fed is unlikely to alter its plans to cut rates at next month's meeting after Chair Powell made it clear that it's time to shift policy toward lower rates," he said.

Other figures Thursday showed US jobless claims fell slightly last week. Investors will next look at the Fed's favoured gauge of inflation on Friday and key jobs data next week.

In Europe, Germany reported the country's inflation rate slowed to 1.9 percent in August, the lowest in more than three years and within the ECB's two-percent target.

With Spain also reporting slower inflation and other eurozone countries expected to do the same, "that paves the way for a September rate cut," said Franziska Palmas, senior Europe economist at Capital Economics.

The Frankfurt DAX reached an intra-day record of 18,936 points, and closed up 0.7 percent at 18,912.57 points.

Earlier in Asia, Tokyo closed flat, Hong Kong rose and Shanghai, Taiwan and Seoul fell.

Asian tech shares were among the worst performers in the wake of Nvidia's results, with chipmakers taking a hit.

SK Hynix fell more than five percent in Seoul, where Samsung was also down more than three percent.

Taipei-listed TSMC, a key producer of semiconductors, sank more than two percent.

Oil prices jumped after declining in the past two sessions on renewed concerns over Libyan supplies.

New York - Dow: UP 0.7 percent at 41,391.84 points

New York - S&P 500: UP 0.8 percent at 5,634.87

New York - Nasdaq Composite: UP 1.1 percent at 17,750.88

London - FTSE 100: UP 0.4 percent at 8,379.64 (close)

Paris - CAC 40: UP 0.8 percent at 7,640.95 (close)

Frankfurt - DAX: UP 0.7 percent at 18,912.57 (close)