LONDON/SINGAPORE, Nov 12 — Fresh turbulence hit global stocks on Thursday as a spy scandal threatened to oust chip giant Nvidia’s chief executive officer (CEO) Jensen Huang, while United States (US) Treasury yields touched five per cent again and the dollar reached a 19-month high on firming US rate rise bets.
Europe saw early cheer, with the comparatively tech-light STOXX 600 hitting its first record high since August, but strains were showing elsewhere.
Asian markets suffered falls overnight after reports that Nvidia's board had met to decide the fate of long-time leader Huang sent the company's shares diving nearly seven per cent in premarket US trading.
Chinese tech firms that use Nvidia chips for their artificial intelligence models fell heavily in Hong Kong. Alibaba and Tencent tumbled 6.7 per cent and 2.6 per cent respectively, amid concerns that Washington may now curb access to offshore data centres with the most advanced processors.
Many of the other global market issues were back in play too.
Brent oil had bounced back above US$92 a barrel as persistent tensions in the Middle East offset rising regional output, while the dollar was at its highest since last April in the aftermath of US President Donald Trump's 'Liberation Day' tariff announcements.
The US currency has gained almost 1.5 per cent since hot inflation data earlier this week triggered a repricing of expectations for another US Federal Reserve rate hike next month.
A week ago, traders saw a one-in-three chance that the US central bank would hold steady. The CME Group's FedWatch tool said that traders now price in a 90 per cent chance of a 25-basis-point hike, and 9.2 per cent odds of a larger 50-basis-point hike.
"The Nvidia issue has played its part in creating a risk-off move that is pushing up the dollar. The deep driver, though, is the big shift in the tone around inflation.
"The market is now off the fence on the question of whether there is an inflation problem," Societe Generale strategist Kit Juckes said.
Wall Street worries
That shift was being felt in bonds too. The US 10-year Treasury yield briefly hit five per cent again in Europe after US bond markets had been closed on Wednesday.
Momentum was lacklustre, though. Germany's 10-year Bund yield — the benchmark for much of Europe — nudged down to 3.3 per cent, though it was still set for a weekly rise of around five basis points.
In contrast to Europe's record-high stocks, Wall Street futures were 0.5 per cent weaker amid the furore around Nvidia, a firm that until recently had been the world's most valuable company.
A flurry of reports said Nvidia's board had met late Wednesday to decide whether to oust Huang following allegations that he had an affair with a suspected spy for China. The New York Times has also reported that Huang had had an affair with a fellow Nvidia executive.
"It looks bad from every single angle. I believe the board will not oust him until they have an all-star, a known entity in the tech sector, to replace him.
"At the end of the day, let us not forget that the Nvidia chip is the centrepiece of the AI story," said Longbow Asset Management CEO Jake Dollarhide in Tulsa, Oklahoma.
It was not yet clear who might replace Huang as CEO if he goes. Meanwhile, Chinese domestic GPU makers surged on Thursday as expectations rose that Nvidia's troubles could help local chip suppliers win greater market share.
Saxo Bank's chief investment strategist Charu Chanana said Nvidia earnings next Tuesday are the next key test.
"Strong results could reaffirm the AI growth story, but may not fully remove the governance discount," she said.
