Japan hits record highs

US stock indices closed at fresh record levels yesterday, driven by strong gains across the ‘Magnificent Seven’ constituents. Nvidia was the standout performer. Yesterday it rallied 5% and has built on those gains overnight. Buyers rushed in after the AI chip designer announced that it would be building seven supercomputers for the US Department of Energy. The stock has jumped around 18% since this time last week, and it is fast approaching a market capitalisation of $5 trillion as it trades at new all-time highs.

Source: TN Trader

Meanwhile, Apple became only the third company in history, after Nvidia and Microsoft, to surpass the $4 trillion valuation mark. Microsoft is up 28% so far this year, with much of those gains linked to its 27% holding in OpenAI, the privately-owned company at the vanguard of artificial general intelligence (AGI), and owner of ChatGPT.

Alphabet, Meta Platforms and Microsoft are set to report earnings after tonight’s close. This is at 20:00 GMT due to clock changes over the weekend. Other ‘Mag 7’ constituents, Apple and Amazon, report on Thursday.

These corporations are at the vanguard of developments in AGI and have made highly significant investments in its future. Investors will be expecting to hear how those investments are working out, even though there’s been relatively little to show for all the spending and promises to date.

It’s no secret that the ‘Mag 7’ stocks make up over 36% of the S&P 500 by market capitalisation. So, current valuations look stretched, although many would say they are justified. Despite this, some analysts caution that any disappointing earnings updates from the tech giants could weigh heavily on sentiment.

Investors also must consider the Federal Reserve’s rate announcement later this evening. The market expects a quarter-point rate cut, which will take the Fed Funds rate down to a range of 3.75-4.00%, its lowest level in three years. But the focus will be on Fed Chair Jerome Powell’s subsequent press conference.

Investors will want to hear what he says about the likelihood of further monetary easing, for this year, but also around when the Fed’s balance sheet reduction programme (QT) will end. It will be interesting to hear what Mr Powell thinks about the labour market, given the dearth of economic data this month due to the ongoing government shutdown.

European stock indices were mixed in early trade on Wednesday. This was despite a rally across US stock index futures, which saw the NASDAQ and S&P 500 trade at fresh all-time highs. The German DAX and French CAC both drifted lower, while the Euro Stoxx 50 and the UK’s FTSE 100 pushed on to new record highs.

Source: TN Trader

Meanwhile, Spain’s IBEX is an index which has been largely ignored over the past few years. This morning, it added to gains made at the beginning of this week, when it finally broke above its previous all-time high of 16,040 from November 2007. ¡Felicidades!

As with the US, investors have plenty to consider: the Fed’s rate announcement later this evening, tech results after the US close and the possibility of a trade deal between the US and China tomorrow. Thursday’s ECB rate decision is of little interest as the central bank is expected to keep rates on hold as inflation is tame, even as Eurozone growth remains torpid.

The Forex market was relatively quiet overnight, although the US dollar managed to inch higher against most of the majors. The Dollar Index pushed up above 98.50 before giving back early gains. It remains rangebound with resistance coming in at 99.00, while support is further away at 97.00.

Source: TN Trader

Sterling was weaker across the board this morning. Against the US dollar, sterling has come under steady selling pressure since mid-September and is approaching lows from July.

Investors are cutting their exposure to the British pound ahead of Chancellor Rachel Reeves’ budget next month, and as the UK government buckles uselessly under the weight of a series of bad headlines. But overall, traders are sitting on their hands ahead of the Fed’s rate decision, tech earnings and the Trump-Xi trade meeting tomorrow.

Gold dropped below $3,900 yesterday on the European open. At the time, it was difficult to establish where support might come in, if at all. But the break below $3,900 sparked some buying interest, and that has continued into this morning.

At the time of writing, gold was trading above $4,000 per ounce. Having been seriously overbought according to the daily MACD as gold hit an all-time high just over a week ago, prices corrected sharply. While the daily MACD has pulled back to more reasonable levels, it has certainly not reset and still has a fair way to fall to get back to neutral.

Source: TN Trader

Despite this, the initial selloff from all-time highs was severe, and shorter-term MACDs suggested gold was due for a rebound. The question now is if that rebound is over, and if so, will gold resume its decline?

In other words, does the bounce reflect short-covering and a pause in selling momentum rather than renewed buying conviction? Unfortunately, it’s just too early to know. The gold market is quite volatile at present. And it is likely to remain so, certainly until we hear from the US Federal Reserve tonight, along with any trade deal that Presidents Trump and Xi Jinping may reach on Thursday.

Silver has also bounced back off the lows hit yesterday morning. Silver fell to $45.55 as European markets opened for business before buyers came back in. Like gold, it has built on those gains today, and, at the time of writing, was up close to 6% from Tuesday’s lows.

The selloff from record highs was severe and steep, so a rebound seemed likely. But it is too early to sound the ‘all clear’ for the bulls. Silver may need to find a more significant area of support if it is to launch another attack on all-time highs.

Source: TN Trader

Crude prices were a touch firmer in early trade on Wednesday, halting a slide which began after last Friday’s close. Front-month WTI hit its highest level in just over a fortnight on Friday, coming within a cent of $62.50 per barrel. This followed the announcement that the US was imposing sanctions on Russia’s two biggest operators in the oil market, Lukoil and Rosneft.

Source: TN Trader

Crude prices registered their biggest weekly gain since the summer, breaking a near-relentless selloff as traders considered the ongoing slowdown in global demand growth against an ongoing supply glut. But prices fell back this week as analysts questioned just how effective the US sanctions on Russia may be.

Adding to this uncertainty is whether India and China, Russia’s two biggest customers for its oil, are prepared to look elsewhere for supply. In the meantime, the US has said that its sanctions won’t apply to Rosneft’s German business.

Last night, the American Petroleum Institute recorded a drawdown in US crude inventories for last week. This helped to support prices. The US Energy Information Administration will release its own inventory report later today.

Crypto markets remained range-bound, with Bitcoin trading around $114,000. Price action was muted as traders awaited broader signals from global risk markets and this week’s central bank decisions. Volatility across the sector was subdued, reflecting cautious sentiment and thin participation during the midweek session.

Volatility was also subdued, with the VIX index steady. This reflected some calm ahead of the Federal Reserve’s policy decision later today. Traders appear to be maintaining hedges but are refraining from aggressive positioning until after the Fed’s announcement.