Must read: PMI data, Jackson Hole, Ocado, Nvidia

GLOBAL MARKETS

After the FTSE 100 rallied from six-week lows on Tuesday, snapping a seven-session losing streak, the blue-chip index is trading modestly higher again, inching closer to resistance at 7,300. JD Sports Fashion (LSE:JD.) is towards the top of the FTSE 100, attempting to recoup lost ground after shares fell sharply on Tuesday following a profit warning at Dick's Sporting Goods Inc (NYSE:DKS) in the US.

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France’s August flash services PMI hit 46.7 falling month-on-month and missing analysts’ expectations. The manufacturing reading hit 46.4, also in contraction territory but rising versus July and topping forecasts. In Germany, its manufacturing flash PMI hit 39.1, ahead of last month’s figure and beating expectations but still sharply below 50. The services reading swung from expansion to contraction, hitting 47.3, notably below forecasts for 51.5.

Japan’s Jibun Bank manufacturing PMI rose to 49.7 in August versus 49.6 in July, slightly ahead of expectations. However the reading remains below the 50-boom-bust divide for the third consecutive month.

Central bankers are heading to Wyoming for the annual Jackson Hole Economic Symposium, which kicks off tomorrow. All eyes will be on Fed chair Jay Powell’s address on Friday for clues into whether interest rates will remain higher for longer and whether the ideal soft-landing scenario in which inflation comes down, yet a recession is avoided can realistically be achieved.

OCADO RETAIL

Ocado Retail has cut its prices again, this time on 200 items including Heinz beans, Walkers crisps and Copella apple juice. The joint venture with Marks & Spencer Group (LSE:MKS) is lowering prices by an average of 8%. It comes after the grocer reduced prices in June while other supermarkets such as Tesco have also done the same.

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Ocado Group (LSE:OCDO) is cutting prices in an attempt to boost demand amid the cost-of-living crisis and stiff commercial competition, particularly from the German discounters Aldi and Lidl, which are best known for their low prices. While food price pressures have been easing, they remain sharply above the headline rate of inflation, potentially prolonging the problematic inflationary backdrop in the UK. But the recent decisions by supermarkets to cut their prices could help towards cooling food inflation and in turn the overall rate. Although issues with supply particularly from India and Ukraine are headwinds to watch and could limit the extent to which supermarkets can lower consumer prices further.

In July, Ocado maintained its guidance for Ocado Retail to achieve ‘marginally positive’ EBITDA over the full-year.

NVIDIA

NVIDIA Corp (NASDAQ:NVDA) is expected to report fiscal second quarter revenue of $11.1 billion up 65% year-on-year, towards the upper end of its estimated range. Earnings per share is seen growing by 305% versus last year, reaching $2.07 after a disappointing quarter this time last year.

Nvidia has become a proxy play for the artificial intelligence boom and the explosion of ChatGPT with investors buying up the stock in an attempt to cash in on the AI revolution. The stock has helped power gains for the broader US stock market this year, with the rally driven mainly by a handful of tech stocks including Nvidia, which have been rebounding after the 2022 ‘tech wreck’.

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For value investors, this stock poses problems due to its lofty valuation and gigantic stock price surge so far this year. It trades on a more than 235 price-to-earnings ratio, which is extremely high. Plus there are concerns about further monetary tightening from the Fed that could dampen demand for growth stocks in the second half.

Despite this, Morgan Stanley issued a bullish note on the stock, naming Nvidia as its top pick in mega-cap growth going into earnings season, sending the stock higher last week. There are still reasons for optimism despite its huge rally. Its results outpaced expectations in the first quarter, lifting shares, thanks to blockbuster demand for its GPU chips from cloud vendors. However, its gaming division is more challenging where sales fell short of expectations amid the macroeconomic headwinds.

Options markets are pricing in a major move from its share price in either direction in response to earnings later today.