U.S. stock index futures were little changed on Monday as investors geared up for a busy week, while major chip companies seemed caught in the middle of the latest twist in trade policy ahead of a key tariff deadline with China.
Semiconductor giant Nvidia dropped 1 per cent in premarket trading and Advanced Micro Devices lost 2p er cent.
A U.S. official told Reuters that the companies had agreed to give the United States government 15 per cent of revenue from the sales of their advanced computer chips to China, days after the Commerce Department began issuing licenses for the sale of Nvidia’s H20 chips.
Sale of the semiconductors was an integral issue in the U.S. agreement with China signed earlier this year and could strain the relationship between the two economies just before Tuesday’s deadline for the deal’s expiration.
“The Trump administration reckons higher prices and snarled-up supply chains are an acceptable price to pay to encourage more U.S. manufacturing,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
“The unusual arrangement is another example of a mega tech company acquiescing to the U.S. administration’s demands, to gain an upper hand as trade relations are redrawn.”
Markets also await clarity on the sector tariffs U.S. President Donald Trump has announced.
At 5:45 a.m. ET, Dow E-minis were up 98 points, or 0.22 per cent, with 7,922 contracts changing hands, S&P 500 E-minis were up 6.25 points, or 0.10 per cent, and Nasdaq 100 E-minis were up 11.5 points, or 0.05 per cent.
Traders took breather after last week’s rally helped the S&P 500 and the Nasdaq log their strongest weekly performance in more than a month.
Investors expect the recent shake-up at the U.S. Federal Reserve and signs of labor market weakness could nudge the central bank into adopting a dovish monetary policy stance later this year, fueling much of the optimism.
Tuesday’s consumer inflation report will either cast more doubt or offer clarity for investors, who are currently anticipating the Fed will lower borrowing costs by about 60 basis points by December, according to data compiled by LSEG.
A better-than-feared earnings season was also a relief and BofA’s monthly fund manager survey showed that owning megacap stocks was once again the most popular trade.
Apple was a standout last week following its biggest weekly showing in five years, after the iPhone maker unveiled a series of U.S. investment pledges. The company’s shares were down 0.7 per cent on Monday.
Gene therapy developers fell, with Sarepta Therapeutics dropping 7.6 per cent and Capricor Therapeutics declined 9 per cent as Vinay Prasad, a fierce critic of U.S. COVID-19 vaccine and mask mandates, was expected to return to the Food and Drug Administration.
Intel was up 1.6 per cent and focus turned to a report that said CEO Lip-Bu Tan was expected to visit the White House after Trump called for his removal last week.
Major share indexes around the world crept higher on Monday continuing to grind back towards their late July peaks, with the focus of the week on a crucial report on U.S. inflation that will likely set the course of the dollar and bonds.
Europe’s STOXX 600 share index rose 0.3 per cent, with Asia-Pacific stocks up 0.2 per cent and S&P 500 futures also 0.2 per cent higher.
MSCI’s world share index is now just 0.2 per cent from its all-time high hit in late July as a strong earnings season in the United States, and a mildly positive one in Europe, support overall sentiment, helping investors to shrug off the impact of soft U.S. July jobs data.
Trade and geopolitics loom large this week. A U.S. tariff deadline on China, due to expire on Tuesday, is expected to be extended again, while U.S. President Donald Trump and Russian leader Vladimir Putin are due to meet in Alaska on Friday to discuss ending the Ukraine war.
The main economic release will be U.S. consumer prices on Tuesday, with analysts expecting the impact of tariffs to help nudge the core up 0.3 per cent to an annual pace of 3.0 per cent and away from the Federal Reserve target of 2 per cent.
An upside surprise would challenge market wagers for a September rate cut, though analysts assume it would have to be a very high number given that a downward turn in payrolls is now dominating the outlook.
It also comes at a complicated time for the Fed, with Trump having repeatedly criticized policymakers for not cutting rates at recent meetings, and with the focus on who will succeed current chair Jerome Powell, whose term ends in May.
This, said Paul Mackel, Global Head of FX Research at HSBC, means that the dollar’s reaction to the CPI data will not be straightforward.
If the figure indicates higher U.S. tariff price pressures, “that could support the stagflation narrative, and to the dollar’s detriment,” he said, adding this would also go against the view of some policymakers that tariffs are not causing prices to increase.
“If, however, softer U.S. CPI readings materialize, including the core goods figures, this would likely challenge the dollar too by supporting the case for further Fed easing, and perhaps see greater criticism from the U.S. administration towards Fed Chair Powell.”
Markets imply around a 90 per cent probability of a September easing, and at least one more cut by year-end.
That has helped support Treasuries, and the U.S. benchmark 10-year yield was last 4.25 per cent, hovering near last week’s low of 4.187 per cent.
The prospect of lower borrowing costs has supported equities, along with a run of strong earnings, particularly from tech names.
Analysts were unsure what to make of reports, including by Reuters, that Nvidia and AMD have agreed to give the U.S. government 15 per cent of their revenues from chip sales in China, under an arrangement to obtain export licenses for the semiconductors.
Chinese blue chips added 0.5 per cent after data showed consumer price inflation ticked up in July, but producer prices kept falling as the country’s massive manufacturing sector exported deflation to the rest of the world.
Figures on Chinese industrial output and retail sales for July are due on Friday, and forecasts are for a slight slowdown after a jump in the previous month.
Currencies were quiet, with early trading thinned by a holiday in Japan. The euro was marginally higher at $1.1651 and further away from a recent trough of $1.1392, while the dollar dipped to 147.38 yen.
The Australian dollar eased to $0.6520 ahead of a meeting of the Reserve Bank of Australia, which is widely expected to back a rate cut. It stunned markets in July by skipping an easing of policy to await more inflation data.
In commodity markets, gold fell 1.1 per cent to US$3,360 an ounce after wild swings last week on reports that the U.S. would slap 39-per-cent tariffs on some gold bars, which are major exports of Switzerland. The White House said on Sunday it planned to issue an executive order clarifying the country’s stance.
Oil prices slipped on the possibility that the scheduled talks between Trump and Putin in Alaska on Friday could make progress towards a ceasefire in Ukraine and potentially prompt an eventual easing of sanctions on Russian oil exports.
Brent dropped 0.9 per cent to US$65.97 a barrel, while U.S. crude eased 0.8 per cent to US$63.38.
Reuters
