Nvidia’s earnings prompted renewed buying in AI-linked names, lifting the Nasdaq 100 back towards yesterday’s highs. Tech outperformed while broader markets weakened as risk appetite faded ahead of Kevin Warsh’s Jackson Hole speech and month-end. The FTSE 100 fell as earlier-week gains unwound into broad-based selling, and France’s CAC40 underperformed after higher oil prices weighed on infrastructure group Eiffage.
Sterling extended its decline for a second session against the dollar, although yesterday’s heavier selling pressure eased. GBPUSD softened after a strong rally, with positioning restrained by pre-Jackson Hole uncertainty. Markets are weighing speculation that Warsh could strike a more hawkish tone alongside expectations for a potential September rate hike.
Opportunities and Risks in Tech and European Equities
We should leverage the renewed momentum in tech by focusing on short-term call options on the Nasdaq 100, which is pushing back toward its recent highs. Nvidia’s latest blockbuster earnings, showing massive year-on-year revenue growth, prove that the artificial intelligence trade remains highly resilient. However, we must keep tight stop-losses as high valuations make this tech rally susceptible to sudden profit-taking ahead of the weekend.
Conversely, we see a clear opportunity to short the FTSE 100 or buy put options as European markets face intense downward pressure. Historically, September is the weakest calendar month for the UK index, which has averaged a decline of about 1% over the last twenty years. With rising energy costs dragging down industrial giants like Eiffage, European equities are likely to remain highly vulnerable in the coming weeks.
Currency Market Positioning for Dollar Strength
In the currency markets, we advise traders to position for a weaker pound by purchasing GBP/USD put options. Sterling is looking exhausted after its strong run, and speculation around a hawkish speech from Kevin Warsh at Jackson Hole is already breathing new life into the greenback. If the probability of a September rate hike rises, the dollar will likely surge and drag the pound down further.
