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Market Watch: Nvidia and easyJet break records

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Andrew Gillham, of Team Asset Management, presents the weekly round-up of global markets

GLOBAL stocks struggled for direction in a Thanksgiving-holiday-shortened week for the US exchanges. The blue-chip S&P 500 edged 0.1% higher while the technology-focused Nasdaq slipped 0.3%.

The most eagerly awaited event before markets closed for the holiday was Nvidia’s release of its quarterly earnings report on Tuesday evening. Amid the hype that has propelled the chipmaker’s shares 230% higher this year, it had a lot to live up to, which was ultimately reflected in the muted reaction to another blockbuster report.

Nvidia reported record revenues of $18.1 billion for the three months to the end of October, a 206% increase on the same period a year ago, and 34% higher than the previous quarter. Although it warned of a significant fall in sales to China owing to export restrictions on its high-performance AI chips, the company stressed that it expected the declines to be offset by strong growth in other regions and the rise of generative artificial intelligence, which will underpin long-term demand for its graphics processing units.

Despite beating analysts’ forecasts, Nvidia shares have fallen more than 4% from its record high of $504 set last Monday.

In the UK, easyJet also reported impressive results on the back of strong demand for travel and a record summer. The budget airline revealed that revenues had risen 42% to £8 billion in the 12 months to the end of September, enabling it to generate a profit of £455 million compared to a £178 million loss last year.

The turnaround in performance will also allow it to pay a dividend for the first time since March 2020. In addition to record demand for seats, the airline has seen strong growth in its holiday offerings (+221%) and ancillary revenue, including baggage fees, seat bookings and onboard food and drink sales. Ancillary revenue per seat rose to £23.47, up from £19.43 in 2022.

Chief executive Johan Lundgren noted that the conflict in Gaza would have some impact on winter sales, as flights to Israel and Jordan have been suspended, but that elsewhere the outlook was positive. He pointed to UK consumer research where three-quarters of respondents said they planned to spend more on holidays and travel next year.

Virgin Money, however, didn’t have a good week as its share fell 7% on Thursday after it reported profits of £345 million for the year to 30 September, down from £595 million a year earlier. The challenger bank was hit by larger provisions for credit card arrears where higher interest rates and inflation have made making repayments much more difficult for many customers. The £309m impairment charge is nearly six times higher than a year ago.

The higher cost of living, however, didn’t deter US consumers from spending a record $5.6 billion online on Thanksgiving Day and another record $9.8 billion on Black Friday according to data provider Adobe Analytics.

Traditional bricks-and-mortar stores also reported brisk trade where big discounts on products pulled in the crowds. Consumers typically wait until Black Friday to take advantage of discounted prices on electronic goods such as televisions, household appliances, smartwatches and gaming products.

Gold has continued to climb, reaching a six-month high of $2,015 per troy ounce on Monday. Although the risk of the Hamas-Israel conflict escalating into the wider region has eased, the safe-haven precious metal has benefitted from expectations that the Federal Reserve has finished raising interest rates and the weaker US dollar. Gold doesn’t generate income and can struggle when cash pays relatively high rates of interest.

Brent crude fell back below $80 a barrel after Opec+ pushed back its planned meeting on Sunday to Thursday. The postponement suggests that there is some disagreement among members of the cartel over further supply cuts to support oil prices. Saudi Arabia is expected to extend its voluntary cuts into the first quarter of next year and there is speculation the cartel is weighing up a further production cut of up to one million barrels a day.

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