US stocks rally Friday, but weekly losses pile up

Asian markets kicked off the week on a positive note, supported by upbeat Chinese retail and industrial data. The Nikkei led the way, outperforming its regional peers. In contrast, Europe has had a mixed open. This comes after German lawmakers moved closer to agreeing on reforms to the country’s debt brake rule. Two-thirds support is required, and the vote is expected on Tuesday.

Currency markets were steady in early trade this morning. The euro, buoyed last week by progress on German debt reforms, is now in a holding pattern awaiting further news. Meanwhile, the yen emerged as the early week’s loser, with the USDJPY pushing up toward the 149 level as traders await key data and central bank meetings from the US Federal Reserve and the Bank of Japan.

Gold was a touch firmer in early trade and within striking distance of the key $3,000 mark. Silver was a touch weaker but had bounced off overnight lows and has $34 in its sights. Oil started the week on a positive note, bolstered by political uncertainty and supportive Chinese data. Gas also edged higher, reflecting a more optimistic tone in the energy sector.

Most crypto markets managed to crawl into positive territory this morning. Both Bitcoin and Ether appear to be consolidating. Time will tell if this is a precursor to higher prices or a pause before another leg down. Sentiment remains fragile as risk appetite continues to waver, with investors unsure whether the bounce seen on Friday has real staying power.

The VIX added 2.5% after pulling back during Friday’s risk-on rally, signalling that caution still prevails despite the bullish push to end the week. Traders are keeping a close watch on upcoming events, including a scheduled call between Putin and Trump on Tuesday.

• US Retail Sales: Today’s key data point gives insight into consumer strength amid economic concerns.
• Central Bank Meetings: A packed week ahead, with the Fed, BOJ, SNB, and BOE all set to announce decisions. The Fed meeting on Wednesday remains the focal point.
• Geopolitical Risk: Treasury Secretary Bessent attempted to reassure investors that the White House is actively working to stave off a financial crisis. However, industry figureheads warn that trade wars are becoming the new norm.
• Inflation Outlook: US consumers expect inflation to shoot higher over the next year, adding pressure on the Fed to balance its policy stance.

Friday’s rally offered some relief for the bulls. But the question remains whether it was merely a dead cat bounce or the start of a more protracted recovery. Overnight futures suggest that sentiment remains fragile as traders hesitate to call a bottom. The dollar remains in a holding pattern ahead of the Fed meeting, while gold continues to enjoy strong support despite pulling back after briefly breaking above the key $3,000 level last week.

Oil is showing signs of life, buoyed by positive Chinese data and ongoing geopolitical tensions, but it still lacks strong conviction. Overall, the bears still have a firm grip on the market, and any attempts at a recovery may trigger further selling until clearer signals emerge.