Muted performance from Asian Pacific indices

US stock index futures were firmer in early trade on Monday, following a lacklustre session at the end of last week. All the majors ended Friday little-changed, despite the release of a softer-than-expected inflation print, which briefly lifted sentiment. This followed on from a better-than-expected Non-Farm Payroll release on Wednesday, which itself came after a poor Retail Sales update.

For the week, the losses were broad-based. The Nasdaq ended down 2.1%, the S&P 500 lost 1.4%, the Dow dropped 1.2%, while the Russell 2000 slipped 0.9%. The US stock exchanges are closed today for Presidents' Day, so trade on individual equities will restart tomorrow.

Meanwhile, investors can track US stock index futures to get an idea of sentiment, although these close early this evening, before reopening at 23:00 GMT.

Source: TN Trader

The overall outlook appears uncertain for now. Last week, the Dow spent a good deal of time trading above the psychologically significant 50,000 level before pulling back sharply on Thursday.

Both the NASDAQ and Russell have drifted down from recent all-time highs, while the S&P 500 seems unable to gather enough upside momentum to break and hold above the key 7,000 level.

This suggests that equities have lost some of their upside momentum, and the bulls weren't helped by the sharp pullback in software services companies on fears that AI could eat their lunch. But it’s worth noting that none of the US majors has yet broken down below significant support.

Given this, it is probably too early to call an end to this bull market, although it continues to look very long in the tooth. The bulls can take some comfort from the assumption that the Federal Reserve could well cut rates by another 50 basis points before the end of this year.

European stock indices were a touch firmer across the board this morning, with all dragged higher by a bounce across US stock index futures. Investors continue to digest developments from the Munich Security Conference.

Defence and geopolitics remain in focus following renewed calls for increased European military spending and concerns over the future of transatlantic relations.

Mining stocks were generally lower as metals prices dipped. This weighed on the UK’s FTSE 100 to some extent, although this was more than offset by strength across the banking sector, after NatWest Group began a £750 million share buyback.

As with the US, the broader tone remains cautious, shaped by geopolitical uncertainty rather than near-term economic data.

Source: TN Trader

There was relatively little movement in FX this morning, as action in currency markets remained subdued. The US dollar was steady, and the Dollar Index hovered below 97.00.

The greenback has managed to recover off the multi-year lows hit at the end of last month. But it remains too early to sound the ‘all clear’, as there is still a risk of further dollar weakness which could see the Index retest the multi-year lows around 95.25.

Source: TN Trader

Expectations of further rate cuts from the US Federal Reserve continue to cap dollar upside, with markets increasingly focused on upcoming central bank minutes and inflation indicators. The yen weakened following Japan’s disappointing GDP release, pushing the USD/JPY back above 153.00.

Expectations for an imminent Bank of Japan rate hike eased, but the yen was also just giving back a modest proportion of recent gains. The euro is holding near 1.1860 against the dollar, supported by last week’s CPI data but lacking momentum amid thin holiday trade.

Gold was a touch higher early in the Asian Pacific session to trade back above $5,000 per ounce. But it didn’t take long for sellers to emerge and push prices back down again. By mid-morning across Europe, it was tracking sideways and just managing to hold above $5,000.

But the big question now is whether it can stage a sharp rally from here to attempt a fresh all-time high, or if it requires more of a pullback to reset momentum. While the daily MACD has pulled back from overbought levels, it is a long way above the ‘neutral’ line.

At the very least, gold may have to consolidate further before higher prices are seen. And there’s always the possibility that the top is already in.

Source: TN Trader

In contrast to gold, silver’s daily MACD has plunged below the ‘neutral' line and is back in negative territory. The downside correction from the exceptionally overbought levels seen at the end of January was savage.

Source: TN Trader

While there may well be traders out there looking for a bounce and a retest of recent highs, many are likely to be shell-shocked by the sell-off seen at the end of last month, and this may be holding players back from establishing fresh long positions. It’s possible that most of the selling is over. But positive sentiment has taken a real bashing.

While precious metals remain supported by fundamentals, near-term price action suggests hesitation as investors await clearer signals from the Federal Reserve and upcoming macro data.

Crude oil was little changed in early trade this morning. The market is likely to be relatively subdued given the US market holiday. Front-month WTI was stuck underneath $63 per barrel, and recent attempts to break to the upside have run into resistance at around $66 per barrel.

Source: TN Trader

Markets continue to weigh geopolitical risks against supply-side developments. Attention has turned towards upcoming US-Iran talks and renewed Russia-Ukraine negotiations, though expectations for a swift resolution between either set of parties remain low.

At the same time, reports that OPEC+ may resume production increases from April are acting as a headwind. The prospect of higher output into peak summer demand keeps oil prices capped despite ongoing geopolitical uncertainty.

Natural gas prices fell sharply, down around 7%, as ample supply and favourable weather conditions strengthened the bearish case. Volatility remains elevated, but near-term fundamentals continue to pressure prices lower.

Crypto markets remain choppy. Bitcoin’s recent rebound saw it reverse direction and jump higher after testing support around $60,000. Leverage indicators suggest there is still some downside risk. However, the daily MACD suggests that Bitcoin is very oversold at current levels.

Ether is outperforming on a relative basis but remains below $2,000. Overall, sentiment continues to be fragile, with traders wary that recent gains may prove difficult to hold. Despite being oversold according to its daily MACD, investors will want to see further evidence that the recent rebound off nine-month lows is the start of a sustained recovery.

The VIX remains elevated despite easing slightly on the day. With US markets closed and trading volumes light, investors will be hoping that volatility returns to more subdued levels over the near term.

Attention shifts to later in the week, with minutes from the Fed’s January FOMC meeting the key event. Walmart releases earnings on Thursday, while AI continues to dominate investor focus globally. Despite supportive inflation data, metals are struggling, crypto remains uncertain, and broader markets appear set for a quiet start to the week.