Trading Day: Momentum fizzles, gold sizzles

By Jamie McGeever

ORLANDO, Florida, Aug 3 (Reuters) - Solid corporate earnings and optimism around a peace deal in the Middle East pushed world stocks to new highs on Wednesday, although momentum cooled as investors digested some tech weakness and the latest hawkish remarks on U.S. interest rates from a Federal Reserve official. Meanwhile, gold had its best day in six months.

In my column today, I put Wall Street's race to new highs in the global context - as impressive as it is, it is far from exceptional. The earnings and growth advantage the U.S. has enjoyed over its developed world peers may be shrinking.

If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.

1. US services activity stays strong in July, input costs rise

2. EXCLUSIVE-Samsung, SK Hynix test Chinese chip tools as hedge against US risks

3. EXCLUSIVE-JPMorgan CEO Dimon leads new cross-industry effort to tackle AI risks

4. Three midweek thoughts — AI job losses, Fed's White knight and K-shaped inflation: Mike Dolan

5. Fed's Schmid calls for tighter monetary policy to tamp down on 'too high' inflation

Today's Key Market Moves

• STOCKS: Japan +3.5%, new highs again in Europe and Canada. Same for S&P 500 and Dow, which outperforms.

• SECTORS/SHARES: Six sectors on the S&P 500 rise, five fall. Materials and healthcare +1.5%, comms services and energy -2%. Eli Lilly +5%, Nvidia +3.5%; AMD -7%, Alphabet -4%

• FX: Dollar dips, hovers near 6-week low; yen stabilizes. Asian and LatAm currencies — COP, IDR, PHP, THB — up around 0.5%.

• BONDS: Japan yields fall, 10-year -5 bps; U.S. yields slip ~2 bps across the curve.

• COMMODITIES/METALS: Oil little-changed. Gold +4%, biggest rise in six months.

Today's Talking Points:

Lockup countdown

The SpaceX IPO in June was one of the most anticipated in history, and its first share lockup expiry on Thursday is no different. Insiders who acquired stakes before its June listing at a fraction of the $135-per-share IPO price stand to make big gains, but their sales could add fresh pressure on the stock, which is already 20% below its IPO price and 50% off its high.

Other investors, especially retail investors, could be left nursing pretty hefty paper losses. And if there is a wave of selling, questions around the debut listings of AI kingpins OpenAI and Anthropic are bound to surface.

Inflation expectations

If Fed Chair Kevin Warsh is looking for measures of inflation expectations that lean more to the benign end of the spectrum, he might consider the 1-year inflation swap rate. It was 1.71% on Wednesday, the lowest since 2024 and down from over 3.5% a few months ago. Importantly, it is below the Fed's 2% medium-term inflation target. The 2-year swap rate got as low as 2.07%.

These markets are noisy and there are questions over liquidity, so they aren't the most accurate barometer of inflation expectations (are there any good ones?). But with oil prices down 20% in two weeks, markets are removing a huge slice of the near-term inflation premium that had built up over most of July. Comfort for the Fed?

Time to shine

Gold had its best day on Wednesday in six months, rising 4.5% and moving further away from the $4,000/oz level. Unlike oil or other precious metals lately, gold tends not to move this much — this was one of bullion's biggest one-day rises since the GFC. What gives?

There is no obvious 'fundamental' catalyst, although a softening dollar and lower bond yields always help. Demand from China recently has been strong too. But perhaps the good old big round number - $4,000 - sparked some activity. Gold has flirted with a clean break below this level for weeks but failed. Reuters/LSEG charts show gold's last 'close' below $4,000 was in November, despite a few intraday dips below since June. You can only hold a position for so long.

What could move markets tomorrow?

• China trade (July)

• Mexico interest rate decision

• U.S. Challenger jobs layoffs (July)

• U.S. St. Louis Fed President Alberto Musalem speaks

• Global corporate earnings

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

(Reporting by Jamie McGeever;)