Mixed close for Asian-Pacific stock indices

The Dow Jones Industrial Average, S&P 500 and NASDAQ made new all-time highs yesterday, with tech once again in the vanguard of the move. There were some extraordinary gains for individual stocks. Hewlett Packard soared 30% after it smashed past estimates for both revenues and earnings per share. Server revenue was particularly strong. HP will be using NVIDIA’s new Vera CPU.

NVIDIA also had a solid session, closing up around 6.3%. CEO Jensen Huang is at the Computex conference in Taipei, where he also (amongst other things) tipped up Marvell Technologies, saying it would be the next trillion-dollar company. Marvell has added 34% since his comments.

Yet yesterday's gains across the major US indices were relatively tame. The Dow barely made it into positive territory, while the S&P 500 and NASDAQ were up 0.3% and 0.4%, respectively. The small-cap Russell 2000 slipped 0.5%. US stock index futures were little changed in early trade this morning. While there’s still plenty of energy across tech, every positive session brings out more bubble-speak.

Source: TN Trader

Yet as things stand, it is the ‘fear of missing out’ that continues to drive US equities. This extraordinary rally off the lows from the end of March continues to crack on, even as the daily MACDs suggest that the US majors are all in overbought territory. Yet analysts will argue that the first quarter results season demonstrates not just the resilience of US equities, but their ability to produce earnings growth.

On the flip side, the US /Iranian war continues, and yesterday there were reports saying that, not only were Iranian negotiators considering ending discussions with Washington, but also moving toward a complete blockade of the Strait of Hormuz. Despite this, President Trump dismissed concerns that negotiations could collapse. As far as investors are concerned, FOMO trumps war.

European stock indices were stronger across the board in Tuesday morning trade. All the majors strengthened during the Asian-Pacific session, peaking just an hour or so before the latest update on Eurozone inflation. The German DAX and the French CAC were both at the forefront of the rally, with gains of over 1.0% each.

Source: TN Trader

The latest Eurozone CPI readings showed Headline inflation (including food and energy) ticked up to +3.2% year-on-year. This was in line with expectations, but above the prior reading of 3.0%. Core CPI came in above expectations, and last month’s reading as well.

The news helped to cement the view that the European Central Bank will raise rates by 25 basis points at its next monetary policy meeting on 11th June. At the same time, investors continue monitoring developments across the Middle East and Eastern Europe. Russia’s latest air assaults on Ukraine and ongoing tensions involving Iran have reinforced concerns about geopolitical risks facing the region.

The US dollar was a touch weaker this morning against other majors. But trade was relatively quiet, and the cash Dollar Index continued to hold around the bottom end of a range which has been building since mid-May. This afternoon sees the release of April’s JOLTS Job Openings report, but otherwise there’s relatively little for investors to focus on until tomorrow’s ADP Payroll report and the official Non-Farms update on Friday.

Overall, Eurozone CPI was a touch hotter than anticipated. This has only reinforced expectations for a 25-basis-point rate hike next week from the European Central Bank. The single currency dipped slightly on the news, but only back to levels seen earlier this morning before it had a modest rally.

Meanwhile, Bank of England Governor Andrew Bailey will deliver a speech later today. Previously, he has indicated that UK policymakers should be in no rush to raise rates while uncertainty surrounding the Iran conflict and UK growth continues to overhang the economy.

Source: TN Trader

Gold prices have continued to pick up, carrying on a rally which began yesterday afternoon. The precious metal has been quite volatile of late. Last week, it looked as if it was in serious trouble as it staged a relatively protracted break below $4,400 during Thursday’s Asian Pacific session. But buyers emerged soon after the US open, pushing prices back up towards $4,600 on Friday afternoon.

But then it had another lurch lower, dropping to $4,450 yesterday until, yet again, it was saved by a round of concerted buying as the US markets reopened for business. The US dollar has largely influenced price movements recently. The question is if this inverse correlation is set to continue for a while yet or if gold can break free and do its own thing.

The daily MACD is going sideways just under the neutral level, so it isn’t providing any clues as to where gold goes next. And for now, it appears stuck in a range between $4,400 and $4,600.

Source: TN Trader

Unsurprisingly, perhaps, silver has also proved quite volatile of late. Last Thursday morning, it broke below $72 per ounce, only to bounce and then briefly top $77 earlier this morning. The bulls should take some encouragement from this morning’s price action.

Since Thursday evening, silver had repeatedly bumped up against resistance at $76. Then yesterday afternoon, it looked as if the bulls had capitulated as silver suddenly plunged to below $74. But this proved to be an opportunity for the bulls, who not only came in to support the $74 region but then drove silver straight up above resistance at $76, which, so far, has held as support.

Source: TN Trader

On Friday afternoon, front-month (August) Brent briefly traded below $90 per barrel, its lowest level since 22nd April. This came as traders headed into the weekend with hopes that a breakthrough over US/Iranian peace negotiations may be forthcoming.

Source: TN Trader

Unfortunately, it wasn’t to be. In fact, yesterday brought reports suggesting that Iran could suspend negotiations and potentially consider broader shipping restrictions. The news led to a rebound in oil prices, with front-month Brent coming close to $98 as trading reopened after the weekend.

Despite this bounce, prices remained near the bottom of their recent range. It’s also worth noting that we have been here before. Traders approach the weekend expecting progress in bringing the war to an end, only for the situation to deteriorate.

In the meantime, both the US and Tehran act as if the ceasefire is holding, even as they launch limited attacks on each other. As a reminder, the Strait of Hormuz, that vital chokepoint for around a fifth of the world’s crude supply, remains effectively closed and controlled by Iran.

Bitcoin dropped below $70,000 soon after European stock markets opened and continued to come under downside pressure. It is now trading at its lowest level in close to two months, and sentiment appears to have soured towards the world’s most important cryptocurrency. This is quite a reversal when one considers Bitcoin’s resilience throughout the ten weeks since the US and Israel launched their initial attacks on Iran.

Bitcoin is now trading in a band of support, previously resistance, which stretches down to $65,000. The daily MACD has broken back below neutral and is pointing downwards, suggesting that a retest of February’s low around $60,000 can’t be ruled out. But if buyers were to reemerge and push prices back above $70,000, then there could be a rebound in bullish confidence.

Attention now turns to an important week for economic data releases that could influence market direction and interest rate expectations. Key updates include Eurozone inflation data, US JOLTS job openings, ISM services data, and Friday’s Nonfarm Payrolls report.

Markets are also monitoring developments surrounding US-Iran negotiations, which continue to influence energy prices, inflation expectations and broader risk sentiment.

Despite growing concerns about stretched valuations in technology stocks, investor appetite for AI-related companies remains strong. For now, equity bulls continue to maintain control of market momentum, although rising geopolitical risks and questions around global growth could create pockets of volatility in the days ahead.

* The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance.