European stock indices join the rally

US stock indices continued their record-breaking run on Thursday, closing higher across the board. The tech sector led the charge once again, in a move which saw the NASDAQ 100 hit fresh all-time highs, while the S&P 500 closed within striking distance of its own record. The latter traded at a new all-time intra-day high earlier this morning.

Source: TN Trader

The Dow also joined the celebration, closing 0.9% higher on Thursday, although it remains around 3% below its own all-time high from December last year. Despite a weaker GDP print, investor sentiment remains bullish, underpinned by strong corporate earnings, easing geopolitical risks and fresh trade developments.

Overall, the bulls remain firmly in control as markets head into the final session of the week.

Yesterday, President Trump confirmed that the US and China have formally signed a new trade agreement, concluding months of negotiations. The deal cements the framework established in recent Geneva meetings, transforming the previous handshake consensus into a binding agreement.

While details remain sparse, the announcement removes another layer of uncertainty from the global risk environment. Investors have welcomed the confirmation as a positive signal for supply chains and global trade, even if the implementation timeline remains vague. The announcement helped solidify Thursday’s gains and set a constructive tone heading into Friday’s session. 

Investors were also encouraged after White House Press Secretary Karoline Leavitt told reporters that President Trump’s July 8 and 9 deadlines for restarting tariffs on the rest of the US’s trading partners were “not critical,” and could be extended.

Asian Pacific stock indices ended mixed overnight. Japan’s Nikkei 225 jumped 1.4% to close at a six-month high. Equities were buoyed by softer-than-expected inflation as Tokyo Core CPI dropped to 3.1% year-on-year, down sharply from the prior reading of 3.6%. 

However, Hong Kong’s Hang Seng and the Shanghai Composite lost 0.2% and 0.7% respectively, reflecting some investor hesitation despite improving trade headlines.

FX markets were relatively subdued overnight. However, the US dollar is still under pressure despite progress on trade and tariffs and as geopolitical tensions recede. Of course, this is exactly what President Trump wants, as a weaker dollar makes life easier for US exporters as their products become cheaper. 

There are losers, too, of course, as the weaker dollar increases costs for US importers. However, this simply improves the dynamics as far as Mr Trump is concerned, as he expects the US balance of trade to ‘improve’ as a result. Yesterday, the Dollar Index hit its lowest level since February 2022, marking a decline of 12% since mid-January. 

Meanwhile, the EUR/USD and the GBP/USD traded at their highest levels since September and October 2021, respectively.

Source: TN Trader

Despite the softer inflation print overnight, the Japanese yen was little-changed across the board this morning.

Source: TN Trader

Gold fell sharply overnight in a move which saw it drop back below $3,300. The sell-off came despite US dollar weakness, a factor which many observers see as bullish for gold. The lessening in geopolitical tensions, together with the improved outlook as far as President Trump’s trade wars are concerned, were good excuses for the sellers to come out in force. 

Gold was hovering around $3,280 this morning, a minor support level which has held over the past month. The daily MACD has dropped back to neutral levels. But it is pointing downwards, and its gradient suggests that downside momentum has increased. 

Should gold fail to hold current levels, then the next significant support comes in around $3,200.

Source: TN Trader

Silver also dropped sharply this morning, losing over 2% and taking it back down to its own level of minor support around $36 per ounce. As the chart shows, $34 is a far more significant level of support, and a pullback to here would certainly help to reset the daily MACD which remains overbought.

Source: TN Trader

There’s not much to say about oil this morning that hasn’t already been said. The fact that prices are now consolidating after an extremely volatile fortnight can be seen clearly in the four-hour chart of front-month WTI (US Light).

Source: TN Trader

The ceasefire between Israel and Iran continues to hold, and concerns over supply disruptions across the Middle East have faded. Oil infrastructure was undamaged by Israeli airstrikes and the Iranian response, and the Strait of Hormuz remained open. Front-month WTI rose a touch on Friday morning, as traders priced in the likely uptick in fuel demand as the US driving season approaches. 

That said, many traders remain cautious, noting that if geopolitical calm holds, the near-term bias could shift bearish again. For now, oil bulls appear to be treading carefully.

Natural Gas rose sharply overnight, though the move was modest compared to some of the moves seen earlier in the week. Gas briefly broke above the key 4 handle, only to be sold into, and while volatile, overall the market lacks clear direction.

Cryptocurrencies were mixed overnight. But moves were contained with both Bitcoin and Ether trading back in their respective ranges. Traders seem to be taking a wait-and-see approach as the market consolidates recent gains and digests macro headlines.

The VIX edged slightly lower overnight, now trading just below the 19 level. With equity markets at or near record highs and no immediate volatility catalyst in sight, investor complacency appears to be setting in. That said, traders remain alert for any sharp reversal, especially with key inflation data due later today.

After posting stronger-than-expected earnings, Nike shares surged more than 10% in after-hours trading yesterday. The company also indicated it had moved past its recent sales struggles, giving investors confidence in its forward outlook. As a Dow component, Nike’s post-market rally will likely positively impact broader sentiment into today’s session.

Investors are now turning their attention to today’s Core PCE inflation release, the Fed’s preferred metric. After recent GDP and CPI data raised questions about growth and pricing pressures, this afternoon’s print could help clarify the central bank’s near-term path. Meanwhile, President Trump continues his campaign for rate cuts, once again publicly calling on the Fed to lower interest rates - even as Fed officials signal patience.

The bulls remain in control as US indices continue to hit record highs, defying concerns around weaker growth and mixed data.

President Trump’s trade deal with China added further fuel to the rally while the dollar stays on the back foot.

All eyes are now on the inflation print and whether Trump takes another swing at Powell post-release.