European markets open flat as optimism wanes

US stock indices continued to grind higher yesterday, with all the majors closing in positive territory. The S&P 500, NASDAQ and Russell 2000 all ended up 0.6%, while the Dow lagged a touch, adding 0.3% on the session. Equities were supported by investor optimism surrounding US-China trade talks.

Source: TN Trader

Investors spent much of the session in wait-and-see mode, clinging to hopes that a breakthrough might materialise from the high-stakes discussions in London.

Late in the day, US Commerce Secretary Howard Lutnick confirmed that a consensus had been reached. This starts with a framework to revive the exchange of sensitive goods, built on last month’s Geneva agreement that triggered a rollback in tariffs. While the statement provided a backstop for equities, the lack of detail tempered the positive reaction.

The deal still awaits approval from both Presidents Trump and Xi, leaving markets in limbo. For now, investors view the trade talks as broadly positive and see no reason to cut their exposure to equities.

Asian Pacific stock indices followed Wall Street higher overnight, with gains seen across the board. Hong Kong’s Hang Seng and the Shanghai Composite rose 0.9% and 0.5% respectively, boosted by the positive headlines from the London trade talks, and as concerns of an immediate breakdown in negotiations receded.

Broader sentiment was constructive, albeit restrained, as traders acknowledged that much of the current optimism remains speculative until formal commitments are signed.

In corporate news, Nintendo’s SWITCH 2 console made waves, selling a record 3.55 million units in its first four days on the market. The blockbuster launch suggests consumer appetite remains robust, and this added to the upbeat tone in Japan.

FX markets were mostly directionless overnight, with the US dollar little changed. Sterling pulled back a touch but remains in sight of the three-year high hit last week against the US dollar. Traders appeared to be squaring their books ahead of today’s UK spending review.

The euro was a touch firmer against the dollar while the Japanese yen was a tad lower. The Dollar Index was unchanged, demonstrating a lack of overall direction due to the dearth of solid trade talk news. Markets showed a clear lack of conviction, preferring to sit on the sidelines until today’s US inflation data provides more clarity on rate expectations.

Source: TN Trader

Gold posted modest gains overnight, pushing further above intermediate support around $3,300. It continues to be in favour amongst investors concerned about the Trump administration’s tariffs, as well as worries that the US dollar remains historically overvalued. 

President Trump has made it clear that he favours a weaker dollar as this should boost US exports. If the greenback continues to head lower, this should support higher gold prices.

Source: TN Trader

Silver fell back in early trade this morning, pulling further away from the near thirteen-year high hit on Monday, just a touch shy of $37 per ounce. Despite strong interest earlier in the week, upside momentum has stalled somewhat. Silver found support this morning around $36.

Crude oil prices bounced modestly in early trade, recouping some of yesterday’s losses as traders positioned themselves ahead of the weekly US inventory report due later. On Tuesday, front-month WTI broke above $65 per barrel to trade at its highest level since early April. 

Oil has pushed up steadily over the past month. But it has not yet broken out of its trading range, and $65 remains a key marker of resistance, as it acted as support back in March this year. OPEC’s chief struck a confident tone, expressing optimism about future demand.

Source: TN Trader

That said, traders remained focused on near-term supply data, which could either confirm or challenge that narrative.

Natural gas prices edged higher overnight, though the market remains stuck in a range. Despite a few attempts to break higher in recent sessions, follow-through has been limited. Traders are likely waiting on inventory data or a shift in weather patterns to prompt a more decisive move.

Crypto markets were steady overnight, with Bitcoin once again approaching its prior peak around $112,000. The mood across the asset class was a bit mixed. Ether pulled back from yesterday’s high as it came close to retesting resistance around $2,800.

The Volatility Index (VIX) hovered on either side of 19.00 as the market consolidates at slightly elevated levels. This suggests that the bulls still have the benefit of the doubt, even as macro risks quietly stack up.

Today’s main event is the US CPI print, which is due at lunchtime. This could reset expectations on interest rates for the rest of the year, heading into the Fed’s monetary policy meeting next week. Also on the docket are Oracle earnings after the bell. Elsewhere, global trade remains in focus. 

The US-Mexico negotiations may move sectors like autos and agriculture, while Boeing continues to lobby for airline-related tariffs to be dropped. Meanwhile, the court has ruled that Trump’s tariffs will stay in place during the appeal process.

The bulls still appear firmly in control as far as US stock indices are concerned.  Tuesday’s positive session reinforced the market’s tendency to look past weak detail in favour of momentum and tone. The trade announcement lacked clarity, but its existence alone was enough to support sentiment.

Today’s inflation report could shift the narrative. But until then, markets seem inclined to drift higher. With volatility subdued and earnings still offering support, record highs remain within reach, assuming the headlines cooperate.