Asian Pacific indices drift lower

US stock index futures were firmer across the board in early trade this morning. This followed on from yesterday’s selloff, which saw the NASDAQ, and to a lesser extent the S&P 500, drop sharply. The NASDAQ and S&P 500 ended down 1.0% and 0.5%, respectively, on Wednesday, as tech stocks bore the brunt of the selling.

Despite this, both indices ended well above their session lows as dip-buyers rushed in to take advantage of lower prices. In contrast, the Dow only lost 0.1% while the small cap Russell 2000 jumped 0.7% to hit a fresh record high.

Source: TN Trader

Investors were anxious to dump chipmakers and other AI-adjacent tech stocks. The trigger for the selling came on reports from Reuters that Chinese customs authorities had blocked Nvidia’s H200 chips from entering the country. In addition, President Trump announced a 25% tariff on certain US semiconductor imports. These headlines ripped across the sector, dragging Microsoft, Meta, and Amazon down over 2%, while Oracle and Broadcom slid around 4%.

Nvidia itself lost 1.4%, despite later confirmation that the US will approve H200 sales to China while taking a 25% cut of revenues. Despite this significant pullback in tech leaders, investors used the proceeds of their sales to increase their exposure to overlooked corners of the market with cheaper valuations.

Overall, this is viewed as a positive development as it indicates a healthy broadening out of stock market exposure and shows that investors are not ready to give up on equities, despite a stack of disparate geopolitical uncertainties, together with an underwhelming start to the fourth quarter earnings season.

On that note, yesterday brought results from banking giants Wells Fargo, Bank of America and Citigroup. Wells Fargo sank over 4% after disappointing fourth-quarter revenue, while Citigroup and Bank of America both ended down over 3%. This followed on from a disappointing reaction to JP Morgan's results on Tuesday. Today sees updates from Goldman Sachs, Morgan Stanley and BlackRock.  There’s also the latest weekly Unemployment Claims release.

European stock indices had a mixed start on Thursday as the German DAX and French CAC pulled back from recent all-time highs. Despite this, the Euro Stoxx 50 had a strong start to the session, rallying to fresh record highs. ASML, the Dutch maker of machinery vital to chip manufacturers, was up well over 4% in early trade. This followed the release of a solid set of quarterly numbers from the Taiwan Semiconductor Manufacturing Company overnight.

Meanwhile, the UK's FTSE 100 extended its record-breaking run. It was supported by news that the UK’s GDP surprised to the upside, expanding 0.3% in November, well ahead of expectations. Investors were also considering yesterday’s tripartite meeting between the US, Denmark and Greenland to discuss ownership of the latter. The matter remains unresolved, with a Danish official stating that there were ‘fundamental disagreements over ownership.’

Source: TN Trader

FX markets were relatively quiet again this morning, with most pairs trading in narrow ranges. The Dollar Index again attempted to push back above 99.00 on a cash basis. But it keeps running into resistance around here, as every attempt to push above here since Friday has been rebuffed so far. Concerns over the Fed’s independence continue to linger following renewed pressure from the White House.

Yesterday, President Trump said that he has no plans to fire Jerome Powell as Chair of the Federal Reserve, despite the Department of Justice’s criminal investigation over what Mr Powell told Congress last summer concerning the refurbishment of the Federal building. The President said it was ‘too early’ for a decision.

Meanwhile, Iran's leadership threatened an attack on US bases in the Middle East should President Trump follow through on threats of military intervention should the regime carry out the death penalty for protestors. Mr Trump backed down overnight, insisting that Tehran’s vicious retaliation was over.

Sterling was a touch weaker across the board following the upbeat GDP data, as traders weighed stronger near-term growth against a still-cautious Bank of England outlook. The Japanese yen was little changed after yesterday’s rally.

But the USD/JPY remains within sight of yesterday’s eighteen-month high. Japanese Finance Minister Satsuki Katayama once again intervened verbally, warning speculators that ‘appropriate action would be taken against excessive FX moves. Analysts believe the USD/JPY would have to reach 161-163.00 for the authorities to intervene physically.

Source: TN Trader

Gold eased modestly from yesterday’s record highs, dropping briefly below $4,600 overnight, having traded at $4,643 yesterday evening. Stronger US wholesale inflation and Retail Sales data reduced expectations for near-term Fed cuts, and this encouraged some mild selling. At the same time, easing geopolitical fears around Iran trimmed some safe-haven demand.

Source: TN Trader

Silver saw much sharper moves. Late last night, silver hit a new all-time high just below $93.60. It then fell close to 8% over the next few hours. While this selloff took place at the start of the Asian Pacific session, when liquidity is poor, it still demonstrates the kind of volatility that traders should now expect with silver trading at such lofty levels.

Source: TN Trader

Oil prices pulled back sharply in late trade yesterday, and the selling continued this morning. The pullback followed a five-day rally, which saw front-month WTI break out of a downtrend which had been building since the summer. This week’s countertrend rally saw WTI trade above $62 per barrel yesterday to hit a ten-week high. The gains came as geopolitical tensions rose.

Source: TN Trader

Oil traders were particularly concerned by President Trump’s threat of intervention (likely military) should the Iranian regime start to execute arrested protestors. That threat appeared to evaporate overnight, and front-month WTI fell back sharply towards $59 before a modest bounce. The question now is whether the US military threat is over. And, if so, will crude oil fall further with prices dropping back into the downside trend? 

That said, the broader backdrop remains complex. Rising US crude inventories and increased Venezuelan oil flows toward the US weigh on prices. But ongoing geopolitical uncertainty may still put a floor under crude oil for now. While some see scope for further upside if tensions re-escalate, the market remains vulnerable should the risk premium unwind further.

Should there ultimately be regime change in Tehran, then this would suggest another source of additional supply. But, as seen over the last few days, there’s also the more immediate risk of potential supply disruption triggering sharp rallies.

Natural gas prices have attempted to stabilise following another lurch lower yesterday. Prices found a modest bid overnight ahead of weekly inventory figures. Recent price action has been choppy, with traders reluctant to commit aggressively as short-term fundamentals remain finely balanced. So far, every attempt to find a bottom has proved illusory as prices continue to pull back from the three-year peak in early December.

Bitcoin and Ether have remained relatively resilient as they continue to recover off their respective lows from November. Both have put in a succession of higher highs and higher lows. Bitcoin now has built up some support around $90,000, while Ether now needs to push on up from $3,100.

As far as intermediate resistance is concerned, Ether needs to break back above its January high around $3,450. Bitcoin is now back above its own highs from November, which means that $100,000 is the next obvious upside target. From a bullish perspective, it’s encouraging that both cryptos held up well despite yesterday’s equity market selloff.

Volatility jumped sharply during Wednesday’s equity sell-off, with the VIX rising as much as 8% as the major US indices hit their daily lows. The VIX subsequently pulled back as equities rallied, and the January contract is back below 17.00 and trading at yesterday’s open price. The move reflects growing sensitivity to headlines rather than outright fear, with markets still far from stress conditions.

Attention now turns to earnings from Goldman Sachs and Morgan Stanley, following a largely underwhelming start to fourth quarter earnings from major banks. US jobless claims headline today’s data, alongside a busy slate of Fed speakers.

Geopolitics remain a wild card, with Iran and Greenland both firmly on investors’ radar. The dollar has found some support, while metals look increasingly stretched. Crude oil remains vulnerable to shifting headlines. Crypto continues to defy easy classification. For now, markets appear to be pausing rather than breaking — but complacency may yet be tested.