Nvidia Results, US-Iran Tensions, and Tariff Uncertainty Rock Markets

Global markets are bracing for a week of volatility, with investors awaiting Nvidia’s earnings report amid escalating geopolitical tensions and a chaotic shift in US trade policy. Uncertainty surrounding new tariffs imposed by President Trump has rattled confidence, while a potential escalation in conflict between the US and Iran adds another layer of risk.

Tariff Chaos and Economic Impact

The US Supreme Court’s recent ruling against President Trump’s emergency tariffs triggered a swift and unpredictable response from the administration. After the ruling, which deemed the tariffs illegal, Trump announced a new 10% universal tariff on all imports, utilizing a different federal law with a limited 150-day duration. This rate was subsequently raised to 15%, surprising even some within his own administration.

Economists anticipate limited immediate overall changes, but warn of potential instability. Rodrigo Catril, senior FX strategist at NAB, cautioned that the situation could lead to a “vicious cycle” of tariff announcements and cancellations, creating prolonged uncertainty. Source

The bond market reacted negatively to the tariff news, with fears rising that the US government may require to repay approximately $170 billion in revenue, potentially increasing the budget deficit by 0.5% to 6.6% of GDP.

Nvidia Earnings: A Key Test for the AI Sector

All eyes are on Nvidia as the tech giant prepares to release its earnings report. Nvidia represents nearly 8% of the S&P 500 index, making its performance a significant indicator of the health of the AI sector. Source

Analysts predict a 71% rise in earnings per share to $7.76, although estimates vary widely, ranging from $6.28 to $9.68. Options trading suggests potential stock volatility of at least 6% in either direction following the announcement.

Geopolitical Risks: US-Iran Tensions

Oil prices are fluctuating ahead of renewed talks between the United States and Iran, scheduled for Thursday in Geneva. The risk of US military strikes remains high if a diplomatic resolution is not reached. Source

Market Performance

Despite the prevailing uncertainty, MSCI’s broadest index of Asia-Pacific stocks outside Japan rose 0.5% in light trading. South Korea saw a continued bullish trend, increasing by 2.0% after a 5.5% jump the previous week. Still, futures contracts on the S&P 500 and Nasdaq fell 0.3% and 0.4% respectively, reflecting pre-earnings jitters surrounding Nvidia.

The dollar faced downward pressure amid speculation that the US trade policy chaos could reinforce a “sell America” trend. The dollar lost 0.4% against the Japanese yen, reaching 154.36, while the euro gained 0.4% to $1.1826. It similarly fell 0.5% against the Swiss franc, to 0.7718.

Gold benefited from its safe-haven status, rising 0.8% to $5,143 per ounce, and silver gained 2% to $86.24 an ounce. Brent crude fell 0.6% to $71.29 a barrel, and US crude lost 0.8% to $65.95 a barrel.

Nvidia Legal Update

In December 2024, the Supreme Court dismissed NVIDIA’s securities fraud appeal as improvidently granted. Source The case, NVIDIA Corp. V. E. Ohman J:or Fonder AB (Docket No. 23-970), involved disputes over disclosure of NVIDIA sales to crypto miners. Source