Mixed close for Asian Pacific indices

The Dow outperformed the other US major stock indices yesterday. It jumped 1.2% to close at a fresh all-time high. In contrast, the tech-heavy NASDAQ lost 0.3% while the S&P 500 and Russell 2000 edged up 0.2% and 0.1% respectively. Investors looked to broaden their exposure beyond the tech sector and into more defensive plays. There were gains for old fashioned dividend-paying blue chips such as McDonald’s, Walmart, Home Depot, Johnson & Johnson and Eli Lilly.

Source: TN Trader

The healthcare sector has rebounded lately, with the Health Care Select Sector SPDR ETF up over 12% since late September. The gains came despite all the regulatory uncertainty since the Trump presidency began earlier this year. But there’s no sign that investors are about to throw in the towel when it comes to tech.

Nvidia and Palantir may have had a torrid start to November. But they have surged back to life since hitting their respective lows last Friday. In a move which has become commonplace since the stock market lows of October 2022, investors rushed in to take advantage of lower prices and bought the dip.

There will come a time when this ‘strategy’, such as it is, won’t work. But recent experience has shown it to be an effective method of profiting from an equity market on steroids.

While the banks and bond markets were closed for Veterans’ Day, yesterday saw the release of the brand-new weekly ADP employment report. This showed that private employers cut payrolls, in another sign of softness in the labour market. This saw the probability of a 25-basis point rate cut next month from the Fed edge higher, although at 63% it’s far from a done deal.

Meanwhile, optimism is building that the shutdown could soon end after the Senate passed a spending bill that now awaits a House vote. Overall, when it comes to US equities, there are plenty of potential tailwinds and few apparent headwinds as far as investors are concerned.

The third quarter earnings season has been particularly robust, with S&P 500 year-on-year earnings growth on course for its fourth consecutive quarter of double-digit gains. Even the prospect of a confusion of official economic data releases once the shutdown ends is largely ignored. If the data is good, then what is there to worry about? And if it’s bad, then investors can look forward to easier monetary policy. Party on.

Both the Euro Stoxx 50 and Spanish IBEX rallied sharply in early trade this morning, in a move which saw them hit fresh all-time highs. The German DAX and French CAC also rallied, closing back in on their own record levels from last month. Sentiment was broadly positive across European markets, reflecting optimism that the US government shutdown could soon end, potentially easing one of the key sources of recent investor anxiety.

The Senate’s passage of a funding bill on Sunday has fuelled expectations that a deal could be finalised by the end of the week. This is adding to positive sentiment as investors consider productivity gains from the future development of AI and solid third quarter corporate earnings.

Germany’s CPI came in line with forecasts at 2.3% year-on-year, indicating that inflationary pressures remain contained. Meanwhile, the UK’s FTSE 100 pulled back a touch on mild profit-taking following yesterday’s record close.

Source: TN Trader

Currency markets remained largely quiet this morning with traders showing little appetite for major repositioning. The US dollar was firmer against all the majors, making back a significant proportion of yesterday’s losses.

The Dollar Index briefly broke below 99.000 on Tuesday but bounced back sharply. This indicates that 99.00 is a fairly good support level, while we know from last week that 100.00 is the next major level of resistance.

Source: TN Trader

The Japanese yen has continued to weaken. This morning, the USD/JPY hit its highest level since February this year, coming within ten cents of 155.000. The yen continues to be out of favour for now, as investors shun safe havens and increase their exposure to risk.

The sell-off in the Japanese currency comes even as the Bank of Japan suggests that a rate hike could come next month or early next year.

Traders spent the first few hours of this morning’s session banging their screens, trying to unstick the gold price. But it wasn’t a technical issue. Instead, there was little interest in pushing prices in either direction.

Gold had a solid start to the week with strong gains on Monday. It built modestly on those yesterday but drifted off to sleep in early trade this morning. Prices then dipped as lunchtime in Europe approached, no doubt triggered by a modest bounce in the US dollar. But overall, gold is managing to hold on to gains made since last Tuesday’s low.

The daily MACD continues to look constructive from a bullish perspective as it curls up off neutral levels. But there’s also a hint of nervousness out there. Some participants are concerned that the pullback from last month’s all-time highs may not be over.

They feel that gold may need a bigger correction than the one seen to date, given the size of the upward move.

Source: TN Trader

Meanwhile, silver pushed up again overnight. It broke back above $51.50, recouping a significant proportion of the 7% single-day loss from three weeks ago. It too is looking constructive from a bullish perspective.

Upside momentum has been building quite positively since it hit the neutral level after being very overbought last month. But, as with gold, some traders seem suspicious of the current rally and feel that silver may have further to fall.

That could well be so, particularly after its recent runup. But it’s also worth considering that gold and silver aren’t joined at the hip. Both precious metals are capable of doing their own thing, as was seen back in 2011 when they both hit record highs, but with a six-month gap.

Source: TN Trader

Oil prices eased slightly overnight, retracing part of Tuesday’s advance that had lifted front-month WTI crude above the $61 per barrel for the first time in over a week. Today’s modest decline came amid subdued trade, with participants reluctant to take fresh positions ahead of US inventory data, which was pushed back due to the Veterans’ Day.

Source: TN Trader

The American Petroleum Institute (API) will release its weekly update tonight, while the official inventory numbers from the US Energy Information Administration are released tomorrow afternoon.

Earlier today, the International Energy Agency (IEA) included a new scenario which io raised its forecast for future global demand growth. While this represents quite a reversal for the Paris-based group, it had little impact on the current market. Prices appear to be rangebound, and this has helped the daily MACD push up towards the neutral area from oversold readings three weeks ago.

Natural gas prices pulled back modestly this morning but continue to trade near highs last seen back in March. The market’s ability to maintain this footing reflected ongoing resilience, even as broader commodity movements remained mixed. While activity was muted, gas prices continued to find underlying support.

Cryptocurrencies came close to making back yesterday’s losses in early trade today, extending the cautious recovery that began this week. Both Bitcoin and Ether made gains, both benefiting from the broader improvement in market sentiment. Still, traders kept positions light following recent volatility.

The move higher reflected a continuation of the “risk-on” tone seen in equities, though crypto markets continued to show a degree of hesitation. While sentiment has improved, upside momentum remains limited for now, with investors preferring to wait for stronger conviction before extending exposure.

Volatility remained contained. The VIX has pulled back sharply from its highs seen last week, highlighting the lack of immediate concern among investors despite lingering macro and policy uncertainties. Equity markets have stabilised, and the government funding situation appears closer to resolution.

For now, traders remain alert but untroubled, due to a positive earnings season, a lessening of trade tensions and the prospect of lower borrowing costs should the labour market continue to weaken.

Sector rotation remained the main theme heading into midweek trade. After a brief pause in technology names on Tuesday, the Dow took the lead, underscoring the strength of cyclical and defensive sectors.

With US stock index futures indicating early strength, technology could once again find some upside momentum. The absence of major data and earnings reports means Fed speak will dominate the day, alongside continued developments around the government shutdown.