Nvidia’s shares declined due to weaker guidance and the absence of sales forecasts for China, which is impacting US equity futures. In fiscal Q2, Nvidia reported revenue of $46.7 billion, exceeding expectations. However, its guidance for Q3 at around $54 billion did not meet some forecasts. Concerns about H20 chip sales in China were raised, but there could be positive developments if approvals are granted. Nvidia also announced share buybacks due to strong AI demand. In Japan, tariff negotiator Akazawa canceled a trip to the US to focus on domestic matters. BOJ board member Nakagawa highlighted trade risks and stressed the significance of the Tankan survey for evaluating these impacts. The USD/JPY currency pair traded within a narrow range, while major currencies slightly weakened against the dollar.

Capital Expenditures and Interest Rates

In Australia, Q2 capital expenditures rose by 0.2%, below the anticipated 0.7%. The Bank of Korea kept its base rate steady at 2.5%. China held productive trade talks in Canada and aimed to increase AI chip production. Business confidence in New Zealand showed a slight uptick, but UK services confidence fell, with the CBI warning about costs and weak demand. Japan’s Nikkei 225 index increased by 0.7%, whereas Hong Kong’s Hang Seng index dropped by 0.6%. The Shanghai Composite rose by 0.1%, and Australia’s S&P/ASX 200 also inched up by 0.1%. Nvidia’s results indicate that the AI-driven market surge is losing steam, despite the overall positive numbers. The market’s negative reaction to guidance that wasn’t stunning signals that expectations have become too high. It may be wise to buy September or October put options on the Nasdaq 100 (QQQ) to safeguard against a wider tech sector decline.

Opportunities in Volatility Products

The instability surrounding the market’s top leader offers a chance to utilize volatility products. The CBOE Volatility Index (VIX) has remained low, recently trading below 16, especially amidst increasing macroeconomic concerns. Purchasing VIX call options or futures could be a smart way to hedge against the complacency observed over the summer. We have seen this before, where a few major tech stocks drive the market, similar to late 2021 before the downturn in 2022. The fact that Nvidia’s strong results failed to lift futures is a concerning sign. It suggests that the easy profits in the AI sector may already be realized, making it a good time to protect gains by selling out-of-the-money call spreads on top tech stocks. The ongoing trade disputes are no longer mere background noise; they are clearly expanding beyond the US and China. The World Trade Organization has reported a mere 0.9% growth in global merchandise trade volumes during the first half of 2025, citing these tensions. This situation supports a stronger U.S. dollar, making long positions in the dollar index (DXY) against a mix of trade-sensitive currencies appealing. In the currency market, the Bank of Japan’s explicit warning about tariffs while USD/JPY hovers around 147.50 is particularly significant. We’ve seen major Japanese government intervention to support the yen back in 2022 when the dollar surpassed 145. The current lack of action from the BOJ, combined with geopolitical risks, suggests a potential sharp move in the market. This makes strategies like a long straddle on USD/JPY a viable option to capitalize on the increasing likelihood of a breakout. Create your live VT Markets account and start trading now.

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