European markets slip

US stock indices sold off on Monday as investors positioned themselves ahead of Nvidia’s earnings report due Wednesday, and as they considered President Trump’s continued interference at the Federal Reserve. The Dow fell 0.8%, while the S&P 500 and Nasdaq lost 0.4% and 0.2% respectively.

Source: TN Trader

All gave back a large chunk of last week’s gains made on Friday afternoon following a key speech from Fed Chair Jerome Powell. Speaking at the Jackson Hole Economic Symposium, Mr Powell suggested that the central bank was ready to loosen monetary policy. The markets interpreted this as a green light to rate cuts, starting with 25 basis points at next month’s monetary policy meeting.

The probability of a September cut stood at 71% prior to Mr Powell’s speech but then shot up to 91%, before moderating a touch to 84%, according to the CME’s FedWatch Tool.  

But since Friday’s close, US stock indices have headed lower. There has been a sharp increase in political uncertainty after President Trump threatened a 200% tariff on China if rare earth exports are restricted. In addition, Mr Trump has ‘fired’ Federal Reserve Governor Lisa Cook, following allegations of mortgage fraud.

Investors are becoming increasingly concerned about the President’s persistent interference in the central bank's business. Mr Trump has launched a series of personal attacks on Fed Chair Powell and is also in the process of loading the roster of Fed governors with his own appointees.

US stock index futures extended their losses in early trade on Tuesday, signalling a cautious tone following Monday’s selloff. Nvidia’s earnings report after Wednesday’s close is without doubt the biggest event of the week. It is worth noting that the generative AI chipmaker now accounts for 8% of the S&P 500 by market capitalisation.

There has never been a single company that has that amount of influence on the index before. As far as data is concerned, there’s the weekly Unemployment Claims number on Thursday, followed by Core PCE (the Fed’s preferred inflation measure) on Friday.

Asian Pacific stock indices were lower across the board on Tuesday. Renewed trade tensions and political uncertainty dampened sentiment. Nissan shares were the standout underperformer, plunging 6% after Mercedes-Benz confirmed plans to sell its 3.8% stake in the Japanese automaker.

Japan’s Nikkei 225 fell 1.0%, while Australia’s ASX 200 declined 0.4%. Hong Kong’s Hang Seng and the Shanghai Composite ended down 1.2% and 0.4% respectively. Investors cut their overall exposure to global equities because of concerns over President Trump’s escalatory rhetoric on tariffs and his abrupt dismissal of Fed Governor Lisa Cook, once again undermining the US Central Bank’s independence.

Oil prices dipped this morning, giving back a significant chunk of yesterday’s gains. Crude oil rallied sharply on Monday on news that Ukraine launched attacks on Russian energy infrastructure. The rally was underpinned by rising fears that the ongoing Russia-Ukraine conflict could disrupt supply chains, with the possibility of broader spillover effects on energy flows.

Additional support came from the threat of US sanctions targeting Russian oil exports, further tightening the supply outlook. But front-month WTI ran into resistance at $65 per barrel. This is a level which acted as support throughout July before it broke below here earlier this month.

Source: TN Trader

The US dollar fell sharply overnight as investors reacted to news that President Trump had ‘fired’ Federal Reserve governor Lisa Cook. Ms Cook is alleged to have committed mortgage fraud. But many observers still question whether the President can remove a Fed governor.

Nevertheless, this was seen as yet another attack on the Fed’s independence as Mr Trump gets busy replacing current governors with his own preferred candidates. The Dollar Index dropped overnight but then steadied. But it took another turn lower as the afternoon approached, pulling back from 98.00.

Source: TN Trader

On the rates side, the 10-year US Treasury yield edged up to 4.30%, as markets reassessed the impact of Powell’s dovish Jackson Hole remarks against the backdrop of political uncertainty.

Gold and silver were both firmer in early trade on Tuesday, building on recent gains. But both pulled back from session highs as the US dollar dipped. Both precious metals rose initially on the news that President Trump had got involved again with the Federal Reserve, this time ‘firing’ Fed governor Lisa Cook following allegations against her of mortgage fraud. But neither could hold on to early gains as the US dollar slipped.

Source: TN Trader

Source: TN Trader

Cryptocurrencies finally found a bid this morning following yesterday’s sharp sell-off. Bitcoin dipped below 110,000 before pushing higher, while Ethereum rallied off $4,300. Both had bounced sharply on Friday following Fed Chair Jerome Powell’s dovish tone at Jackson Hole. But broader weakness across equities continues to weigh on risk-sensitive assets such as crypto.

The VIX fell sharply on Friday following Jerome Powell’s more dovish than expected speech at Jackson Hole. But it has picked up a touch this week as investors adopt a wait-and-see approach ahead of Nvidia earnings after tomorrow’s close, and as they await further clarity on how much loosening in monetary policy is likely before the year-end.

Investors remain in wait-and-see mode as the spotlight shifts to Nvidia’s earnings on Wednesday and the September Fed meeting, where a rate cut is increasingly anticipated. For now, political developments, trade rhetoric, and Powell’s recent dovish tone set the backdrop for cautious trading across global markets.