Japan hits new record while China falls

Futures on the NASDAQ and S&P 500 were sharply higher this morning in a move which reversed most of yesterday’s losses. The rebound came after Amazon and Apple reported earnings after last night’s close. Amazon jumped 13% after it released better-than-expected earnings and revenues. But what really caught the eye was the 20% jump in quarterly revenues in its cloud unit.

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Apple also reported results which exceeded expectations. Sales of its latest iPhone 17 were particularly strong, and fourth quarter guidance was positive, helping the stock rally 3%. The news gave the whole tech sector, including semiconductors, a much-needed lift. Meanwhile, Netflix added around 3% after announcing a 10-for-1 stock split.

US stock indices sold off yesterday, led by the tech sector. This came after Alphabet, Microsoft and Meta Platforms released their quarterly results, highlighting the shifting dynamics of AI-related spending. Alphabet rallied over 7% as it delivered a strong set of numbers. But Meta and Microsoft both fell sharply, and this weighed on the tech sector as a whole.

Despite reporting its strongest revenue growth since early 2024, Meta said it incurred a $15.93 billion one-time charge tied to President Trump’s “One Big Beautiful Bill Act.” The company noted that the legislation will impact federal cash tax payments for the remainder of the year and beyond.

Meanwhile, Microsoft’s update revealed a hit to its earnings of $3.1 billion from its investment in OpenAI, raising fresh questions about the near-term returns of heavy AI spending. The NASDAQ led declines across Wall Street yesterday and ended the day down 1.6%. Investors were also underwhelmed by the terms of a trade deal between the US and China. There was some relief that China will, for the next twelve months, remove export restrictions on rare earths and critical minerals.

President Trump also announced a 10% reduction in tariffs on fentanyl-related imports and an overall cut in duties on Chinese goods to 47%. The agreement eased fears of a full-blown trade war between the US and China. But many important issues remain unresolved, including the supply to China of Nvidia’s highest spec chips and the ownership of TikTok.

It is also unclear if Taiwan was a subject for discussion. Markets responded cautiously, viewing the deal as a temporary pause rather than a long-term breakthrough in trade relations.

On Wednesday, the US Federal Reserve cut rates by 25-basis points as expected. But Fed Chair Jerome Powell stated that another cut in December was not a foregone conclusion. Last week, the CME’s FedWatch Tool showed a 95% probability of another quarter point cut before the year-end. That has now fallen to 67%.

Meanwhile, earnings season continues today with tech now taking a back seat. Instead, oil majors Exxon Mobil and Chevron take centre stage.

European stock indices were indifferent to the jump in NASDAQ and S&P futures this morning. The US rally was tech-related – a sector which is underrepresented across UK and European indices. In fact, there were losses across the board as the Euro Stoxx 50, German DAX, French CAC, and even the Spanish IBEX, pulled back from record highs.

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The latest flash estimates for Eurozone inflation came in roughly in line with market expectations. Core CPI rose 2.4% year-on-year, slightly above the 2.3% expected, but unchanged from the upwardly revised prior reading. Headline CPI rose 2.1% as expected, and a touch below the previous update of 2.2%.

In any case, Eurozone inflation continues to be much closer to its 2% target than either the US (3.0%) or the UK (3.8%), giving the European Central Bank enough room to ease monetary policy further to try and boost tepid growth. Yesterday, flash GDP data showed the Eurozone economy grew 0.2% in Q3, narrowly beating forecasts of 0.1%.

The modest growth figure underscored the region’s fragile recovery amid slowing manufacturing and persistent fiscal strain. Just after this data was released, the ECB decided to keep interest rates unchanged. It held its deposit facility rate at 2% for a third consecutive meeting, maintaining a cautious stance.

Forex markets were largely subdued going into the weekend, with most major pairs holding within familiar ranges. Yesterday, the Dollar Index broke above 99.00, a level which has acted as resistance throughout this month. The breakout followed Fed Chair Jerome Powell’s comments on Wednesday when he said that a December rate cut was not a foregone conclusion.

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The Index was a tad firmer again this morning, pushing further above the 99.00 level. It has not yet tested this area as support, but it does look as if the US dollar is finally getting some love following a dismal year into September.

Meanwhile, the Japanese yen continued to lose ground. Yesterday, it hit an eight-month low against the US dollar as the USDJPY headed towards 154.50. The yen has lost ground ever since Sanae Takaichi became leader of the ruling LDP party at the beginning of this month.

She is now Prime Minister and is known to favour low interest rates and fiscal stimulus as tools for boosting growth. But the danger here is that the yen becomes unanchored and falls too far, too fast.

Yesterday, the Bank of Japan (BOJ) left interest rates on hold again at 0.5%, where they have been since January. But BOJ Governor Kazuo Ueda sounded distinctly hawkish in comments made after the rate decision, hinting at a rise in either December or January, as long as wage growth continues to rise, and in the absence of any exogenous economic shocks.

Meanwhile, as reported by Reuters, US Treasury Secretary Scott Bessent has chipped in, urging the government under Ms Takaichi to let the BOJ raise rates, and thereby try to steady the yen.

Gold rose sharply yesterday, pushing back up towards $4,050. It has pulled back this morning, and prices were trading just north of $4,000 as the afternoon approached. The next significant support for gold comes in around $3,970.

A protracted break below here would suggest that gold may have further to fall, with a test of $3,800 a possibility. But the longer that it can consolidate around current levels, the more likely that the daily MACD can drop further to more neutral levels. That could set the scene for another rally, although it’s also quite possible that gold has already topped.

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Silver was firmer again first thing this morning, building on gains made since the low hit on Tuesday, just above $45.50. But it gave back ground as the morning progressed, with prices breaking below $49 per ounce. 

Silver’s daily MACD has pulled back from significantly overbought levels and has begun to flatten out. This could be an indication that silver has found a floor following its recent correction, although it is too early to sound the ‘all clear’. But it hasn’t yet retested this week’s lows, so that is a positive sign for the bulls.

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Crude oil continues to consolidate in an extremely tight range. Support for front-month WTI comes in around $60 on a closing basis, dropping down to around $59.50 intra-day. Meanwhile, the upside has been capped below $61 since Wednesday.

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Prices were unmoved when details of the US-China trade deal were announced by President Trump on Thursday. Instead, traders have focused on the ongoing dynamics of the market, which show that global demand growth is slowing, while supply remains plentiful.

Despite this, prices were supported this week after both the US Energy Information Administration (EIA) and the American Petroleum Institute (API) reported bigger-than-expected drawdowns in US crude inventories. But it looks as if traders would rather sit on their hands than take big positions ahead of Sunday’s OPEC+ meeting.

The group is expected to announce another production increase as it gradually unwinds previous output cuts. At the beginning of this month, OPEC+ announced a much smaller-than-expected production increase, which caused oil prices to gap higher on the open. Analysts are expecting oil officials to announce a similar rise of 137,000 barrels per day after Sunday’s meeting.

Natural gas prices continued their steady climb, extending recent gains and trading above 4 BTU on the December contract. The move remains tied to shifting weather expectations, as forecasts suggest conditions that could spur higher energy consumption heading into the colder months.

The market’s tone reflected growing attention to seasonal patterns, with traders adjusting their positions accordingly. After weeks of back-and-forth trading, gas has found a firmer footing as sentiment turns cautiously bullish on near-term demand prospects.

Still, while prices are holding firm for now, the overall pace of gains remains measured. Traders appear mindful of the broader energy landscape, balancing optimism over demand with caution about potential oversupply risks later in the season.

Cryptocurrency markets struggled to sustain upward momentum after an initially strong overnight session. Both Bitcoin and Ethereum found solid early bids but failed to hold those gains through the trading day, drifting back toward prior levels. The lack of follow-through highlights an ongoing pattern of range-bound trade, where rallies are met by profit-taking and dips attract short-term buying.

Market volatility remains contained. The VIX’s stability underscores the market’s confidence despite fluctuations across major sectors and asset classes. Even as tech earnings created short bursts of excitement, the broader tone remains one of composure rather than panic.

Traders continue to view the current environment as one characterised by resilience, with the absence of sharp spikes suggesting that market participants are comfortable with risk levels heading into the weekend.

Market focus remains on earnings momentum, particularly within the technology sector, which continues to anchor sentiment. Apple and Amazon’s upbeat results have helped steady futures after a volatile week for Big Tech. Meanwhile, central bank decisions from the Fed and ECB offered little new guidance, leaving traders to interpret the path forward from incoming data and commentary.

The dollar remains a near-term beneficiary, while gold and silver appear to be at a crossroads following recent swings. Equities continue to show strength overall, though stretched valuations and narrowing leadership suggest a more selective environment ahead.