Asian Pacific markets diverge

US stock indices also had a mixed close on Wednesday. The tech sector got a welcome boost following a court ruling in Alphabet’s (Google’s parent company) favour. A federal judge ruled that Google may keep its Chrome browser (there had been fears the company might have to divest itself of its search engine), although it cannot strike exclusive search deals and must share its search data.

The outcome avoided the worst-case scenario for the tech giant. The ruling also highlighted how artificial intelligence has increased consumer choice, as services such as ChatGPT and Perplexity are challenging traditional browsers as the first port of call for online search. This also worked in Alphabet’s favour.

The ruling led to a sharp rally in both Alphabet and Apple, as Apple can continue its lucrative arrangement of preloading Google Search onto iPhones. The NASDAQ ended up 1%, while the S&P 500 added 0.5%. In contrast, the Dow and Russell 2000 both lost 0.1%.

Source: TN Trader

US stock index futures were mixed in early trade this morning, but with a slightly positive bias. The Dow was a touch lower as a significant constituent, Salesforce, fell around 4% in extended trade following some disappointing forward guidance. In contrast, there were modest gains for the other three majors.

There’s a fair amount of uncertainty for investors. President Trump’s tariff announcement in April caused a major market upset. But it didn’t take long for investors to adjust to the new realities of global trade. Now there’s a legal threat to the levies after judges ruled that President Trump doesn’t have the authority to impose tariffs on imports, at least not under the 1977 law that Mr Trump invoked. Lawyers for the Trump administration have asked the Supreme Court to review the judgment, requesting a ruling by early November.

But ahead of all this, tomorrow sees the release of the latest Non-Farm Payroll data. This could be crucial in determining the likelihood of a rate cut at the Fed’s next FOMC meeting, which concludes on 17th September.

 July’s numbers, released in early August, were shockingly bad, with significant downside revisions. This led Mr Trump to lash out and fire the head of the Bureau of Labor Statistics, Erika McEntarfer, claiming she was either incompetent, politically motivated, or a combination of both. President Trump should be praying for another poor payroll update, as this should effectively guarantee a Fed cut.

Yesterday’s JOLTS Job Openings were weaker than expected, and today sees updates on weekly Unemployment Claims and ADP private payrolls.

European stock indices were modestly firmer in early trade on Thursday. The only exception was the French CAC, which drifted lower. Investors were positioning themselves ahead of a government confidence vote, called in desperation by Prime Minister Francois Bayrou, which was due to take place on Monday.

Traders remain focused on the evolving US tariff story, particularly after a federal appeals court declared most of Trump’s levies illegal last week.

On Wednesday night, Mr Trump asked the Supreme Court to take up the appeal swiftly, adding uncertainty to the trade outlook and keeping European sentiment subdued. But ahead of this, all eyes will be on tomorrow’s US Non-Farm Payroll report as this could be crucial in the US Federal Reserve’s upcoming interest rate decision.

Yesterday, gold hit yet another all-time high, just a touch below $3,580. Prices pulled back this morning but continue to hold comfortably above $3,500. At the beginning of this week, gold finally found enough upside momentum to break above resistance at $3,450. This level had acted as a barrier to further gains since early May.

Monday’s breakthrough was a continuation of this latest leg higher, which began towards the end of August. Prices have risen steadily ever since, lifting the daily MACD off neutral levels, although it is still far from being overbought.

Source: TN Trader

Despite this, gold may have to pull back from recent highs before it can resume its strong rally. If so, the manner of any decline, as well as where support may come in ($3,500 or the more significant $3,450), could provide clues as to how gold behaves for the rest of this year. Safe-haven demand has been a catalyst for recent gains. Investors seem reluctant to part with gold even as equities try to stabilise.

Silver pulled back overnight, slipping below $41, having hit a fresh fourteen-year high on Wednesday. The move marks a pause in its recent rally, though the precious metal continues to edge closer to its previous all-time high, just below $50 per ounce, from April 2011.

Source: TN Trader

Oil fell sharply on Wednesday and continued to drop this morning. The sell-off came after OPEC+, which is holding meetings this weekend, indicated that more supply could be coming onto the market. The group continues to unwind previous production cuts at a faster-than-expected rate, and this is yet another factor which has kept oil prices relatively contained this year. Front-month WTI briefly dropped below $63 per barrel in early trade, having approached $66 on Tuesday. 

Source: TN Trader

Attention now shifts to the weekly US inventory update from the Energy Information Administration. This had been delayed due to the US holiday on Monday. Market estimates suggest there was a drawdown of around 2 million barrels, less than the 2.4-million-barrel reduction in the previous week. For now, oil remains under pressure, with supply-side concerns firmly in focus.

Natural gas prices edged higher this morning, adding to gains made on Tuesday and Wednesday. Gas has recovered quite well over the last ten days or so. It had fallen steadily over the two months from 20th June, but there is some evidence that it may have found a bottom.

The daily MACD was relatively oversold just over a week ago. But it has picked up sharply, indicating an uptick in momentum, and is approaching neutral levels. Despite this, the current action suggests the market is caught in a tug-of-war, with neither side fully in control.

Bitcoin turned down overnight, giving back some of this week’s gains. Despite this, it has made a decent recovery overall, and, as things stand this morning, continues to trade above $110,000. Its daily MACD has started to curl up from moderately oversold conditions, suggesting that there’s still some upside momentum.

Meanwhile, Ether continues to consolidate at elevated levels, following its strong rally in the first half of August. This is helping the daily MACD to pull back from overbought levels. The longer it can consolidate above $4,000-$4,200, the more bullish sentiment should start to build.

The VIX has pulled back from the one-month high hit on Tuesday, which came on the back of the Wall Street sell-off. This reflects a market environment that is cautious but not yet experiencing major stress. Even so, the backdrop remains tense. With critical US labour data due out today and tomorrow, and key inflation data next week, all ahead of the Fed rate decision on 17th September, volatility could quickly resurface.

Financial markets appear to be back in a holding pattern ahead of Friday’s key non-farm payrolls report, with estimates currently sitting around a 75,000-payroll increase. Traders are pricing in a high probability of a Federal Reserve rate cut this month. Still, as we saw last month, payrolls can be extremely volatile, even as they remain a major influence on the Fed’s decision-making process.

The dollar remains at an inflexion point, with metals like gold and silver drawing investor attention as they test critical levels. In the near term, employment data over the next 24 hours is likely to play a central role in shaping the direction of equities, currencies and commodities alike.