Asia Pacific stock indices mostly higher

US stock index futures were little changed in early trade on Friday. Investors remained cautious as they kept a close eye on developments surrounding the fragile ceasefire between the US, Israel and Iran.

Yesterday, all the US majors built modestly on the strong gains posted during the previous session as investors responded to the unexpected ceasefire announcement from late on Tuesday. The news had a galvanising effect on financial markets as it came less than two hours before a deadline set by the Trump administration for Iran to reopen the Strait of Hormuz.

Source: TN Trader

President Trump went as far as threatening to wipe out a civilisation if Iran failed to respond. Global equities soared, the US dollar fell, and oil prices slumped.

But yesterday’s trade was somewhat more nuanced as both sides accused one another of breaking the terms of the ceasefire. Israel upped its attacks on Lebanon, claiming that Lebanon was not part of the deal, while Iran continued to block shipping through the Strait of Hormuz.

Despite this, yesterday evening the S&P 500 broke above 6,800 to trade at its highest level since 10th March, taking it within 2.5% of its all-time high above 7,000 from late January. The move occurred around the time that Israel’s Prime Minister Benjamin Netanyahu agreed to begin negotiations with Lebanon as soon as possible.

Despite this, there were charges that continued Israeli strikes on Lebanon violated the ceasefire agreement, adding to concerns about the stability of the arrangement. President Trump accused Iran of breaking the deal by continuing to prevent transit through the Strait of Hormuz. Mr Trump also railed at the suggestion that Tehran would charge a toll for passing through the Strait. 

All the US majors remain on track for strong weekly gains. That being so, investors have a difficult decision to make heading into the weekend. Do they book some profits now, or roll the dice in hopes that the rally in global equities continues into next week? It’s a tricky choice, particularly ahead of planned peace talks between the US and Iran due to begin in Pakistan tomorrow.

Before that, investors will be watching out for the latest US CPI update later today. Yesterday’s Core PCE came in as expected and a touch below the prior reading. The bulls will be hoping that the CPI will also come in cooler than last month's reading.

European stock indices were mixed in early trade on Friday but then turned up as the morning progressed. Investors paused to catch their collective breath heading into the weekend, on what could turn out to be a second successive week of strong stock market gains.

Source: TN Trader

Most of this week’s gains came on the back of the two-week ceasefire announced late on Tuesday. This has proved to be fragile, with complaints from both sides of ceasefire breaches, while the Strait of Hormuz remains effectively closed. Shipping analysts have said that just six vessels crossed this chokehold yesterday, and only one of these was transporting crude oil products.

Before the war, around 130-140 vessels passed through the Strait each day. Investor sentiment improved slightly after Prime Minister Netanyahu confirmed Israel’s intention to begin negotiations with Lebanon soon. However, concerns remain elevated as Iranian officials argued that continued Israeli strikes represent violations of the ceasefire terms between Washington and Tehran.

There was relatively little activity across FX markets on Friday morning, with most pairs stuck in their respective ranges. The US dollar was a touch weaker across the board, although it made some modest gains against the Japanese yen.

Source: TN Trader

The USD/JPY continues to hover just below 160.00. There are lingering concerns over Japan’s dire fiscal position, which continues to exert downside pressure on the yen. But concerns about the possibility of intervention to strengthen the yen have kept a floor under it for now.

The cash Dollar Index continues to trade in a narrow band, with some mild support around 98.50. Traders appear to be sitting on their hands ahead of the release of the US Consumer Price Index (CPI) later today. Then there may be some position squaring heading into the weekend when peace talks between the US and Iran are scheduled to take place in Pakistan.

Gold has spent the day little changed so far and stuck in a tight trading range. Support has held at $4,740 while the upside has been capped around $4,770. These moves are consistent with today’s trade in the US dollar as traders await the latest US CPI update.

Source: TN Trader

Yesterday, Core PCE, the Fed’s preferred inflation measure, moderated a touch, coming out in line with expectations at +3.0% year-on-year, compared to last month’s reading of +3.1%. This was some good news on the inflation front, although one number does not make a trend.

It’s also worth remembering that the Fed’s inflation target is 2.0%, so there’s still a way to go. Today’s Headline CPI, which includes food and energy, is expected to jump to +3.3% from 2.4% previously. Core CPI, excluding food and energy, is forecast to rise more modestly to +2.7% from +2.5% in the prior month.

Anything hotter than predicted is likely to dampen rate cut hopes and support the dollar. That may put some downside pressure on gold in the current environment.

Silver has made steady upside progress after dropping to $61 per ounce just under three weeks ago. On Wednesday, it broke above $77.50 before pulling back sharply, and today it has struggled to break above $76 so far.

Source: TN Trader

Like gold, silver has benefited from the recent drop in the US dollar. But gains were capped as the dollar stabilised amid renewed geopolitical uncertainty surrounding the longevity of the ceasefire agreement.

Investor sentiment remains cautious. Israeli strikes on Hezbollah have continued, despite plans for negotiations with Lebanon, and the Strait of Hormuz remains blocked and controlled by Iran.

This weekend sees diplomatic meetings in Islamabad led by US Vice President JD Vance and Iranian officials, which could lead to some position squaring ahead of tonight’s close.

Crude oil prices have barely moved over the last 36 hours. Front-month WTI has spent most of this time oscillating between $91-$96 while front-month Brent has barely strayed out of the $93-$97 range.

Investors appear to be unsure what to do next following the sharp fall in prices on Tuesday night, triggered by the ceasefire announcement. Brent and WTI fell to $90 and $87 per barrel, respectively. But both have picked up a touch since then as the US and Iran accused each other of breaking the terms of the temporary halt in hostilities.

Source: TN Trader

Iran insists that Israel stop attacking Lebanon, while the US accuses Iran of continuing to block the Strait of Hormuz. President Trump has also warned Iran against charging tanker transit fees through the Strait. It seems likely that oil traders will want to stay relatively flat going into the close ahead of US and Iranian negotiations due to take place this weekend.

Bitcoin edged above $73,000 late last night but has pulled back a touch in early trade this morning. It continues an advance which began at the end of March and looks mildly constructive from a bullish perspective.

Despite this, it continues to trade within a range which has been building since early February, with support coming in around $63,000. But it has not yet managed to retest the highs from mid-March, just below $76,000, and it needs to push above here before it can attempt to break through resistance around $80,000.

Unlike other risk assets, cryptos, led by Bitcoin, have been remarkably resilient throughout the war in the Middle East, with relatively minor intra-day swings. Time will tell, but this could encourage fresh interest from investors, given that many have stayed away in the past due to excessive crypto volatility.

Markets remain buffeted by geopolitical developments as the fragile ceasefire between the United States and Iran continues to shape sentiment across asset classes. Ongoing disruptions to shipping through the Strait of Hormuz and conflicting statements from both sides suggest that escalation risks remain present, keeping investors cautious despite recent gains in global equities.

Attention now shifts to the latest US CPI release, which is expected to show further inflation acceleration linked to higher crude prices. That outcome could reinforce the wait-and-see stance outlined in the March minutes from the Federal Reserve and influence expectations around the timing of future rate adjustments.

Currency markets are already reflecting this uncertainty, with the US dollar stabilising after recent weakness while both the euro and pound react to shifting inflation expectations and policy divergence signals.