Asian Pacific indices steadier

US stock indices closed sharply lower on Tuesday, compounding losses from Monday’s session. The only exception was the small cap, domestically focused Russell 2000, which added 0.3%, having lost close to 2% in the previous session. The S&P 500 fell 0.8%, logging its fourth straight decline, to post its longest losing streak since August.

The Dow fell 1.1% partly due to disappointing Home Depot earnings. The bricks and mortar retail giant missed its earnings expectations for the third straight quarter. It also announced a cut to its full-year forecast. The stock dropped around 5% to trade at its lowest level since April.

It was down again this morning and has now lost 21% over the last two months. This was an indication of weaker consumer spending, and there was confirmation of this today when Target announced a drop in quarterly sales and downgraded its full-year profit guidance.

Lowe’s and TJX announce their own results later today. The tech-heavy NASDAQ fell 1.2% yesterday, weighed down by some notable losses across the tech sector. Microsoft fell 2.5%, while AMD and Palantir dropped 3.3% and 1.0% respectively. Nvidia slid 1.4% and briefly broke below support at $180 before recovering a touch. The chip designer at the forefront of the development of Artificial General Intelligence (AGI) releases its earnings after tonight’s close.

Source: TN Trader

It’s probably not an exaggeration to say that these quarterly results, along with Nvidia’s forward guidance, could set the tone for the whole stock market as we go into year-end. Investors appear more unsure over the outlook for AGI than at any time since this tech-led rally began in October 2022. There are concerns that it may take a long time for the big tech hyperscalers to see a return on their AGI investments, with some analysts wondering if they ever will.

At the same time, there are worries over the circularity of the investing environment. Just yesterday, AI start-up Anthropic added to these when it announced a $30 billion investment in Microsoft, with Microsoft and Nvidia pledging investment back into Anthropic. This is on top of the concentration risk in stock market portfolios, with the ‘Magnificent Seven’ making up a highly significant share of investor exposure.

Nvidia’s stock has fallen around 14% since the beginning of this month, so bulls will argue that there’s plenty of room to the upside should the company beat expectations later this evening.

Ahead of this, there are minutes from the last Fed monetary policy meeting. This was when the Fed announced a 25-basis point rate cut, as expected. Although Fed Chair Jerome Powell then warned that another cut in December was far from certain.

Once Nvidia’s earnings are released, investors will focus on September’s delayed Non-Farm Payrolls, which are due to be published tomorrow. These may influence members of the Federal Reserve when it comes to their December rate decision.

But it already looks as if a significant number of FOMC members would prefer to keep rates on hold next month and await further clarity over inflation and the labour market as fresh government data is released.

European stock indices were mixed in early trade on Wednesday. Investors were unwilling to add to their overall exposure ahead of tonight’s earnings update from chip giant Nvidia after the US close.

UK inflation data showed a slight drop in year-on-year Headline and Core CPI from the prior month. But there was some disappointment after Headline CPI (which includes food and energy) came in a touch higher than expected.

Despite this, as far as markets are concerned, it looks as if it has dipped enough for the Bank of England to go ahead with a rate cut at its next meeting in December. Having said that, there is considerable uncertainty ahead of next week’s budget from Chancellor Rachel Reeves.

An income tax may now be off the table, but given all the trial balloons from the Treasury, nothing else is. The UK’s FTSE 100 continues to test support around the 9,550 region.

Source: TN Trader

Meanwhile, the final updates of Eurozone CPI confirmed a Headline rate of 2.1%, and a Core reading of 2.4%. This shows that Eurozone inflation is very close to the European Central Bank’s (ECB) 2% target.

The ECB has hinted previously that its rate-cutting days are over, for now, despite tepid economic growth. Economists expect the ECB to hold rates steady next year, particularly as unemployment remains low.

Overall, sentiment has been fragile since AI-related worries resurfaced, and this morning’s trade demonstrated that lingering uncertainty. With Nvidia holding outsized influence over broader risk appetite, European traders appear content to tread water until fresh signals arrive.

The US Dollar Index continues to find support. This morning it headed up towards 99.50 to hit its best levels in just under a fortnight. It has now added around 0.8% over the past week, having posted successive daily gains since Friday.

The Index looks as if it wants to retest resistance at 100.00. But it may have to backtrack and consolidate for a while to reset and rebuild upside momentum. If it does, and if it were to hold support at 99.00, then 100.00 would look like a reasonable upside target. But a prolonged break below 99.00 raises the possibility of a steeper decline, one which, in theory, could retest September’s lows under 96.00.

Meanwhile, the Japanese yen was weaker across the board this morning. This comes as senior finance officials in Japan’s government meet with their opposite numbers in the Bank of Japan (BOJ). There is much to consider, as the BOJ has made it clear that it is preparing to tighten monetary policy, even as the new government under Prime Minister Sanae Takaichi prepares a large package of fiscal stimulus. This appears to be a contradiction, which it is.

Although it is generally agreed that care must be taken to ensure that the Japanese yen doesn’t suffer a disorderly slump. That would suggest that officials stand ready to intervene at some stage, should the yen continue to weaken, similarly to what happened in the summer of 2024. This morning, the yen fell to a ten-month low against the US dollar.

Source: TN Trader

Gold was relatively quiet overnight, having lost some of yesterday’s gains in early Asian Pacific trade. But it suddenly lurched higher as the UK opened for business, pushing back above $4,100 for the first time since Friday.

Yesterday morning, gold briefly broke below $4,000. But in an encouraging development for the bulls, it appeared to find some solid buying around that level. Traders have capitalised on those gains this morning. However, it is still worth noting that the daily MACD has flattened out since Thursday last week, suggesting a slowing in upside momentum.

Today’s price action may change that to some extent. But the big test will come should gold manage to retest resistance around $4,200 during this rally. A prolonged break above here may bring in some fresh buying. But a sharp rejection could be an indication that prices have further to fall. For now, gold is ignoring the US dollar rally.

Source: TN Trader

At the beginning of this week, silver was struggling to find a foothold, with prices on the verge of breaking lower. But it found some support around $49.50, and yesterday it made back all of Monday’s gains. It has built on those this morning, putting in a sharp rally on the London open to take it back above $52 per ounce. Can it push up further from here? Of course.

After all, it was less than a week ago that silver got up to $54.39, coming within 25 cents of its all-time high from mid-October. But at this stage, it’s equally likely that silver reverses course once again. Some technical analysts point to the double top as evidence that silver is heading lower from here.

That could be the case. But another pullback could give silver’s MACD another chance to reset, possibly below the neutral level. If so, then the bulls may argue that this could set silver up for a rally to fresh all-time highs.

Source: TN Trader

Crude prices were weaker this morning after the latest weekly inventory data from the American Petroleum Institute (API) showed an unexpected build in US crude stockpiles. Front-month WTI dropped below $60 per barrel, having pushed back above here yesterday to close around $60.50.

Traders are now waiting to hear if they get confirmation of the build from this afternoon’s official inventory data from the US Energy Information Administration (EIA). Over the past three weeks, oil has traded in a relatively tight range. The high-low extremes for front-month WTI are $62 and $58 per barrel.

But for most of this period, oil has traded around $60, with resistance around $61 and support around $59. This is an indication of the indecision surrounding the oil market currently.

Source: TN Trader

There has been a persistent bearish feel to the market, with observers continually pointing to a slowdown in demand growth, even as the market remains very well supplied. But markets are nothing if not unpredictable. And there’s a danger of a big counter swing taking place, especially once everyone gets comfortable with a single overriding narrative. Be careful out there.

Yesterday, gas prices pulled back to their lowest levels in a week. But it didn’t take long for buyers to reemerge and push prices back up again. With no major catalysts overnight and sentiment dominated by broader macro drivers, gas quietly does its own thing. It has been in a strong uptrend since the end of August. It may need to pull back further or consolidate for longer, to add to gains so far.

Yesterday, Bitcoin bounced sharply after briefly dropping below $90,000. But it reversed direction overnight, and once again slipped below this level, where it found some buying interest. Investors have doubts over the Artificial General Intelligence trade, and these have built ahead of the key earnings report due from Nvidia after tonight’s close.

With Bitcoin and other cryptos being at the most speculative range of risk markets, it’s easy to see why they are coming under such strain as overstretched investors unwind leveraged positions. If the overall selloff across tech names accelerates, then it seems likely that Bitcoin will continue to struggle.

The VIX remains one of the clearest expressions of market tension, down only about 1% overnight after a sharp surge earlier in the week. Even with the minor pullback, the index remains elevated, signalling that fear and uncertainty continue to hang over markets.

Volatility has picked up meaningfully as traders grapple with shifting rate expectations, delayed US economic data, and the outsized influence of tonight’s Nvidia earnings release.

The focus remains squarely on Nvidia’s earnings tonight, a single event with outsized influence on sentiment, given the stock’s leadership throughout the AI-driven rally. Fed minutes later in the day will add another layer of detail to the macro picture, while Thursday’s delayed jobs report rounds out a busy week.

The retreat in equities has generated meaningful volatility and pockets of opportunity. Whether markets have reached a short-term bottom may hinge entirely on Nvidia’s results. For now, the tone remains cautious, with traders preparing for a potentially pivotal 24 hours.