Bulls secure second day of gains as Dow, Russell lead

David Morrison

SENIOR MARKET ANALYST

18 Mar 2025

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The bulls found strength for a second consecutive day, with the blue-chip Dow Industrials and the Russell 2000 leading the charge. This was despite a disappointing retail sales print, which raised some concerns but failed to derail the rally. Investors seemed more focused on bargain hunting and momentum rather than dwelling on the weak data.

Overnight, Asian Pacific markets posted broad-based gains, with Hong Kong taking the lead and the Nikkei also advancing as the two-day Bank of Japan meeting kicked off. European stock indices were firmer across the board in early trade.

Yen slips as euro holds firm

In the currency market, the Japanese yen continued to lose ground, marking its sixth decline in seven sessions—or four straight back-to-back declines if you prefer to look at it that way. Traders are closely monitoring the BOJ meeting and looking for any signals that might stabilise the currency. 

Meanwhile, the euro remains elevated, trading north of 1.0900, and is holding steady as markets await the German debt reform vote. Sterling is also resilient, with the GBPUSD trading close to 1.3000, ahead of the Bank of England monetary policy meeting on Thursday.

Gold breaks 3K, oil gains, crypto struggles

Gold surged above $3,000, trading at new record highs as relentless demand continues to propel the precious metal higher. The move has been driven by persistent risk aversion and ongoing economic uncertainties, and it appears that nothing can slow the rally for now. Silver kept plugging away in gold’s shadow, maintaining modest gains but pushing above $34

Front-month WTI crude oil pushed above $68 per barrel, finding some upside momentum as upbeat Chinese data and ongoing Middle Eastern tensions fuelled buying interest. Despite recent downside pressure, crude is showing signs of stabilising, with traders cautiously optimistic about further upside.

On the other hand, cryptos continued to struggle with little signs of joining the broader risk rally seen in equities. Bitcoin and Ethereum both drifted lower, reflecting a lack of conviction from the crypto space as sentiment continues to lag.

Volatility drops, but market sentiment remains cautious

The VIX, now trading on the April contract, dipped below 20, though it may not be telling the whole story. While volatility appears to have eased somewhat, underlying sentiment remains cautious, and traders are wary of sudden reversals.

Regarding data, Germany’s ZEW sentiment report is on tap, alongside the much-anticipated vote on debt reform. Across the Atlantic, a slew of tier-2 data is expected, including housing and import prices, though none of it is likely to significantly move the markets.

Meanwhile, geopolitical developments add another layer of complexity. Israel initiated a massive air strike on Gaza, reportedly killing hundreds, while a scheduled call between Putin and Trump remains on the agenda. In central bank news, Trump has picked Fed Governor Michelle Bowman to replace Barr as the Fed’s supervision head, adding to the evolving landscape ahead of tomorrow’s Fed rate decision.

Market outlook

The bulls are looking to extend their winning streak to a third day, though futures are showing some weakness in early trading. Sentiment is cautious but not entirely risk-averse, as positive momentum from the past two sessions continues to offer some support.

The euro remains in focus as traders await the German debt reform outcome, while gold’s record-breaking rally stays in the headlines. Oil’s modest rebound adds some optimism, but crypto remains stuck on the sidelines. With the Fed meeting looming tomorrow, traders will likely tread carefully, keeping an eye on any developments that might sway sentiment. For now, the path of least resistance appears upward, but risks remain firmly in play.


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