Asia Pacific stock indices mixed

US stock indices eked out modest gains on Thursday. The S&P 500 added 0.3% and broke and closed above 6,500 for the first time. The NASDAQ added as Nvidia made back most of its post-earnings losses, which helped to lift other chipmakers. The Dow edged up 0.2% to close at a fresh all-time high, while the small-cap, domestically focused Russell 2000 finished 0.2% higher.

Source: TN Trader

In early trade this morning, US stock index futures drifted lower. The moves came as investors digested a round of corporate earnings after last night’s close. Ulta Beauty advanced 3%, while Autodesk jumped more than 10% on strong forward guidance. In contrast, Dell Technologies fell 5% after issuing a softer outlook for the current quarter.

Nvidia’s latest earnings report, released after Wednesday’s close, continued to influence sentiment. While overall earnings and revenues came in above expectations, its data centre sales and forward guidance left some investors cautious, leading to a pullback in the stock.

Despite this, the chipmaker’s results failed to dent confidence in the ongoing AI trade. Having fallen 3% soon after its earnings release, Nvidia closed the session down less than 1%. This helped to lift other chipmakers, which had initially sold off in sympathy. This is the last trading session of August, and it has proved to be a solid month for all the US majors.

The Dow, S&P, NASDAQ, and Russell are on track to post gains of 3.4%, 2.6%, and 2.8%, respectively. Meanwhile, the Russell 2000 managed to outperform all its peers with an August gain of 7.6%. This came as investors diversified their exposure into overlooked value stocks, which trade at much lower multiples than the market-leading tech giants.

US markets are closed on Monday for ‘Labor Day’. This marks the unofficial end of the summer as traders and investors return to their desks. The big question now is whether the rally has legs as the Fed teases with a likely interest rate cut next month (its first since last December) while President Trump ramps up the political and personal pressure on Fed members. But ahead of that, today sees the release of the Fed’s preferred inflation measure, Core PCE.

European stock indices were lower across the board in early trade, taking their lead from US stock index futures. But other factors were also at play. This morning saw the release of a stack of mixed second-order data from across the region. Key amongst these were German Retail Sales, which dropped 1.5% in July, a sharper fall than expected, weighing slightly on the German DAX.

The UK’s FTSE 100 also took a hit. UK banking stocks sold off due to market concerns that UK Chancellor Rachel Reeves may be looking to hit them with a new windfall tax. The fears come on the back of a report from the Institute for Public Policy Research (IPPR) suggesting the government may target bank profits to recoup taxpayer funds used during quantitative easing. The FTSE 100 has fallen steadily since hitting a fresh all-time high this time last week.

Source: TN Trader

French stocks were also lower this morning. Investors remain concerned over the ongoing political uncertainty after French Prime Minister Francois Bayrou unexpectedly announced a confidence vote for early next month. Before then, the next big test for global stock indices is how they fare once the US reopens after Monday’s ‘Labor Day’ holiday.

Despite a generally soft tone this week, weighed down by French political concerns, questions over Fed independence, and Nvidia’s earnings, the Stoxx 600 index is on track for a 1.4% monthly gain in August. If sustained, it would mark its first back-to-back monthly advance of the year.

In Forex, the US dollar was little changed this morning after a stretch of consecutive losses. The greenback found some support as traders positioned cautiously ahead of the US Core PCE inflation release later today. The dollar’s pause came as investors reassessed their risk exposure ahead of a key US economic update that could influence Federal Reserve monetary policy.

Meanwhile, the sterling was noticeably lower than all the majors as investors considered the IPPR’s report recommending that the UK government hit UK banks with a new windfall tax. The GBPUSD fell below the 1.3500 mark, and sterling made similar losses against the euro and Japanese yen. With markets in a holding pattern ahead of today’s inflation update, the dollar’s next move will likely hinge on how the inflation data shapes expectations for a September rate cut.

Source: TN Trader

Bitcoin slipped in overnight trade to retest support around the $110,000 level. This latest dip extends the cryptocurrency’s broader pullback, which means it is trading more than 10% below its record peak of just below $125,000 from just over a fortnight ago. The move suggests further profit-taking as traders turn cautious ahead of the PCE report later today.

Ether was also weaker this morning, compounding the weaker tone across the crypto space. Ether’s daily MACD has pulled back sharply from ‘overbought’ levels hit two weeks ago. But it’s arguable that it has not yet fallen back to levels from which a sustained rally can take place.

Gold was a touch lower this morning but still trading above $3,400 – a level it broke above yesterday. On Thursday, gold traded at its highest level in over a month. In fact, it has made relatively steady progress throughout August. This move has taken gold up towards resistance near $3,450, which is the upper band of a trading range which has been building over the last two months.

Yet the daily MACD has only just started to curl up off ‘neutral’ levels, suggesting that momentum has room to the upside. Today’s modest decline suggests some profit-taking as traders await the inflation data for fresh direction. This could prove key and explains why investors are wary of being too overexposed to the metal.

Source: TN Trader

Crude oil drifted lower this morning. This came despite ongoing hostilities between Russia and Ukraine, which targeted each other's energy infrastructure. Last night, Russia launched an extensive raid on the Ukrainian capital, Kyiv, killing many civilians.

This is a sign that Vladimir Putin has no interest in peace negotiations, despite making the right noises, and looks likely to continue to pursue the Russian invasion to capture as much of Ukrainian territory as he can. President Trump has expressed his displeasure but has done nothing practical to aid Ukraine in its existential fight against its invader.

Crude looks like a rangebound market in search of a catalyst for a breakout. Whether that results in higher or lower prices remains to be seen.

Source: TN Trader

Volatility, as measured by the VIX, remains subdued. This reflects the market’s restrained tone as participants await today’s US Core PCE inflation release. Thanks to a series of record highs in US stock indices and despite choppiness elsewhere, the VIX has shown little movement, underscoring the belief amongst investors that the S&P can push higher from current levels.

The focus remains firmly on today’s US PCE inflation data. Equities are trading around record highs; the dollar is steadying, and volatility remains contained. The big question now is what happens when traders return to their desks following the US ‘Labor Day’ weekend?