Asian-Pacific indices retreat

US stock index futures were firmer across the board in early trade on Friday, making back most of their losses from the previous session. On Thursday, the Dow and S&P 500 lost 0.6% and 0.4% respectively, while the tech-heavy NASDAQ slipped a modest 0.1%. It was the Russell 2000 which took the brunt of the selling pressure, ending the session down 1.6%.

The broad-based selloff came after both the S&P and NASDAQ hit all-time intra-day highs soon after the open. While the Dow was still a few basis points below its own record high from February, it managed to break back above 50,000 before also reversing direction.

Source: TN Trader

Interestingly, the Russell showed signs of profit-taking after posting an all-time high on Wednesday. That selling accelerated yesterday evening, although it managed to steady somewhat during this morning’s Asian Pacific session.

The pullback looked like a straightforward case of profit-taking following the near-relentless rally across US equities since the end of March. Certainly, all the major indices appear somewhat overbought when considering their respective daily MACDs.

Soon after the official US close, there were reports of skirmishes between the US and Iran in the Strait of Hormuz. Reports said that US forces intercepted “unprovoked Iranian attacks” against Navy destroyers. US forces then targeted Iranian military facilities responsible for the attacks on US Navy shipping. The military action was played down by the White House, which insisted that the ceasefire was holding.

Crude oil has fallen this morning, having spiked up overnight, while US stock index futures have bounced back, even as traders await the latest Non-Farm Payroll update. The consensus forecast is that 65,000 jobs were added in April, down sharply from March’s 178,000 increase, while the Unemployment Rate is expected to hold steady at 4.3%.

European stock indices were weaker across the board on Friday despite a rebound in US stock index futures. The pullback followed a threat from President Trump to hit the European Union (EU) with “much higher” tariffs. The news reignited concerns over another bout of transatlantic trade tensions.

Source: TN Trader

Mr Trump has accused the EU of failing to uphold its side of last July’s trade agreement, which reduced tariffs on European goods from a proposed 30% to 15%. Mr Trump claimed that the EU has reneged on its promise to cut tariffs on its US imports to zero and warned that tariffs could jump significantly if progress was not made by America’s 250th anniversary.

It looks as if the EU has sat on its hands after the US Supreme Court ruling earlier in February, which said that the president could not use the International Emergency Economic Powers Act to impose sweeping global tariffs. But there are other legal frameworks that he can use, so the EU has brought this on themselves, or rather, EU citizens.

Meanwhile, the conflict with Iran remains in focus after both sides traded fire overnight in the Strait of Hormuz. President Trump insisted the incidents didn’t break the ceasefire, referring to the attacks as “just a love tap.” In the UK, Prime Minister Keir Starmer has vowed to keep calm and carry on despite his Labour Party getting a thrashing in local council elections.

The cash Dollar Index briefly topped 98.00 overnight as traders responded to reports that the US and Iran had engaged militarily in the Strait of Hormuz. But it pulled back from here during the Asian Pacific session as the Trump administration played down the significance of the skirmish, insisting that the original ceasefire remained in place.

Iran’s military claimed the US had targeted civilian and oil infrastructure, while the White House insisted it had responded to attacks on US naval forces from Iranian drones, missiles and fast boats.

Meanwhile, Tehran continues to review a proposed 14-point peace memorandum put together by Washington. The Trump administration wants this to be the basis for restarting peace negotiations in Pakistan, preferably before President Trump flies to China next Thursday and meets with Xi Jinping.

Forex traders are preparing for the latest Non-Farm Payroll release later today. Better-than-expected data, that is, anything significantly above 65,000, revisions to prior releases excepted, would suggest that the US labour market remains in good shape. But it would also suggest that one of the conditions for easing monetary policy this year has not yet been met.

The USD/JPY was a touch lower as the Japanese authorities continue to indicate that they are prepared to intervene further to strengthen the yen. Meanwhile, sterling strengthened on dollar weakness, but also as Labour Prime Minister Kier Starmer insisted he would remain in place despite his party’s dismal performance in local council elections.

Source: TN Trader

Late afternoon yesterday, gold hit a two-week high as it pushed up to $4,765. This represented a gain of just under 6% from Monday’s low, just above $,500 per ounce. It then lost ground, dropping to $4,680 late on Thursday as the US dollar rallied on news of military action between the US and Iran in the Strait of Hormuz.

Since then, and after President Trump played down the incident, insisting that the ceasefire remained in place, the dollar retreated and gold rebounded. As midday approached in the UK, gold was trading quite comfortably above $4,700.

Source: TN Trader

As noted recently, this is a period when gold and the US dollar have a close inverse correlation. This means that for now, much of gold’s behaviour will be directly linked to the back-and-forth in the US/Iran war.

While tensions remain elevated, investors appear hopeful that a broader peace agreement between the US and Iran can be reached. If they’re correct, then that should help to underpin gold prices over the short term. If not, then gold could suffer further selling pressure.

Yet again, the situation is closely similar for silver. Yesterday afternoon, silver briefly popped above $82 per ounce, hitting its highest level in close to three weeks. This high also marked a gain of nearly 14% off the lows hit on Monday.

Source: TN Trader

While crude oil prices have dropped sharply this week, they remain elevated when compared to the second half of last year. This has increased inflation expectations, thereby complicating the outlook for central bank policy. Certainly, this has effectively ruled out the two 25-basis point rate cuts this year, which was the consensus expectation prior to the war.

Investors are now waiting for the US Non-Farm Payroll update, which is expected to show job creation slowed significantly in April.

Yesterday afternoon, front-month (July) Brent fell to a two-week low, just a few cents above $96 per barrel. This represented a decline of over 16% from the post-war highs hit on Monday. The selloff came on hopes that the US and Iran were getting closer to resuming peace negotiations with a view to ending their war, which is now about to enter its eleventh week.

Source: TN Trader

Reports that both sides were ‘closing in’ on a one-page memorandum to cement a peace deal may loom wide of the mark. But investors are still optimistic, safe in the knowledge that both sides want this to end. Although the terms of any peace deal are critical.

Oil prices then rallied off yesterday’s low and briefly spiked higher on reports of renewed hostilities in the Strait of Hormuz. But these were played down by the Trump administration, and crude has drifted lower throughout Friday morning.

Yet again, it looks as if traders are going into a weekend where anything could happen. Oil has fallen a long way from its highs. But it’s far from certain where it goes next.

Bitcoin dropped back below $80,000 in the early hours of Friday morning. It found some support around $79,200 and was attempting to recapture $80,000 during the morning session.

On Wednesday afternoon, Bitcoin hit a high of $82,850, its best level since the end of January. This also represented a gain of 27% since the end of March. This was an impressive achievement, even more so as the rally was steady and measured. A bout of profit taking seemed inevitable after such an advance, and that appears to be what is unravelling now.

If Bitcoin can push back above $80,000 in a relatively short period, then this could encourage fresh buying. But it may require a more prolonged period of consolidation around this level to build up enough momentum for another significant push higher.

Market sentiment remains highly sensitive to headlines surrounding the US-Iran conflict, with investors balancing hopes for a diplomatic breakthrough against the risk of renewed escalation.

The Volatility Index (VIX) remains relatively contained despite the latest military exchange, suggesting investors still believe a broader conflict can be avoided. However, volatility outside of US equities, including oil, currencies and precious metals, continues to reflect fragile confidence.

Today’s Non-Farm Payrolls report now becomes the key macro catalyst for markets. Expectations point to a sharp slowdown in US job creation, though stronger ADP data earlier this week leaves room for a surprise.

Oil markets remain vulnerable to sudden geopolitical developments, as traders continue monitoring the Strait of Hormuz and any further updates on Washington and Tehran’s proposed peace framework.