Asian Pacific equities broadly lower

US stock index futures were sharply lower as European markets opened on Tuesday. The sell-off began during the Asian Pacific session and followed news that China had imposed sanctions on five US-linked subsidiaries of Hanwha Ocean, the South Korean shipbuilder. This added to existing trade issues as both the US and China will start charging port fees on each other’s shipping firms from today.

Source: TN Trader

After a summer where tariff concerns had melted away as far as investors were concerned, the US-China trade dispute is now definitely back in the headlines. While the issues hadn’t gone away, the fact that the Trump administration had postponed the deadline for tariffs on China for three months until 1st November gave, from the market’s point of view, stacks of time for both sides to reach an agreement. But now that the deadline is fast approaching. And Beijing upped the ante last week when it announced restrictions on the export of rare earth minerals and other critical manufacturing materials.

President Trump responded on Friday by threatening fresh 100% tariffs on US imports of Chinese goods. In addition, he called China’s actions ‘hostile’ and ‘extraordinarily aggressive’. Beijing said it was not afraid of a trade war and accused the US of double standards.

Investors rushed to cut their exposure to risk assets, and Friday saw the biggest sell off in US equities since Mr Trump announced his reciprocal tariffs back in April. Risk assets bounced back yesterday after the US President tempered his language in social media posts on Sunday.

Treasury Secretary Scott Bessent has also got involved, insisting that lines of communication were open, that 100% tariffs don’t need to happen and that a key meeting between Presidents Trump and Xi Jinping is still set to go ahead at the end of this month. Despite all this, it’s clear that China is not about to cave to US pressure, as it sees itself as at least an equal when it comes to trade with the US.

This morning has seen some significant selling across the tech sector. Stocks in the ‘Magnificent Seven’ are all down, while semiconductor companies have been particularly badly hit. This all comes against a backdrop of the ongoing government shutdown, which enters its third week tomorrow. But the feeling is that the worse it gets, the greater the chances that the Federal Reserve cuts rates further.

Traders will now turn their attention to the start of the third quarter earnings season with JPMorgan Chase, Wells Fargo, Goldman Sachs, Citigroup, BlackRock and Johnson & Johnson due out today. Federal Reserve Chair Jerome Powell will be speaking later this afternoon.

European stock indices were lower across the board on Tuesday, giving back a significant proportion of Monday’s gains. Traders are now looking at the charts and wondering if that large gap up yesterday from Friday’s close is likely to get filled this week. Europe is once again in thrall to US stock indices as investors have finally been forced to consider the market risk due to the ongoing US–China trade dispute.

Source: TN Trader

The Trump administration extended the tariff deadline on China by 90 days back in the summer. This allowed market participants to park any concerns they had about tariffs and global trade behind the bike shed and ride the rally for all its worth. But that deadline is now looming.

Last week, China fired the latest shot across the bows of USS Trump by announcing new restrictions on the export of rare earth minerals and other critical manufacturing materials. Predictably, President Trump came out swinging. Investors also have an eye on the IMF and World Bank meetings in Washington, where global growth, debt, and inflation remain key talking points.

The IMF is expected to release its latest World Economic Outlook report. The economic calendar may look rather threadbare as far as the US is concerned due to the ongoing government shutdown. But there was plenty to consider in the UK and Europe. The former saw a clutch of labour market numbers which didn’t make for pleasant reading.

The Unemployment Rate ticked up to 4.8%, its highest level since June 2021. And both the Claimant Count and Average Earnings also came in above expectations. All this leaves UK Chancellor Rachel Reeves, not to mention the Bank of England (BoE), in a tight spot.

The former is preparing (we assume) her 26th November budget. The latter wants to cut interest rates, but isn’t helped by high inflation and strong earnings. BoE Governor Andrew Bailey will speak later this evening. Meanwhile, German and Eurozone ZEW Economic Sentiment surveys both disappointed.

The Japanese yen was stronger across the board this morning. Partly this was due to investors heading for the usual Forex haven currencies, the yen and Swiss franc. But the yen’s early strength was also a rebound following heavy selling over the previous week.

The yen’s biggest gains this morning came against the Australian dollar and the British pound. But it also rallied against the US dollar. Like much of Europe, the yen’s weakness has much to do with domestic politics. It gapped lower at the beginning of this month following the unexpected news that Sanae Takaichi had been voted in as the new head of the ruling Liberal Democratic Party (LDP).

Ms Takaichi is known to favour loose monetary and fiscal policies as she sees these as the best way to boost growth. This meant that the Bank of Japan was less likely to raise rates this year, so the yen weakened. But the LDP’s coalition partner, Komeito, left the alliance, which means that Ms Takaichi doesn’t have the votes to become Prime Minister. 

Sterling sold off sharply following the release of UK employment data. The GBP/USD dropped below 1.3300 to hit its lowest level since the beginning of August. The euro was relatively flat, but with a continued downside bias, while the US dollar was a touch firmer across the board.  The Dollar Index pushed back above 99.00 in early trade.

Source: TN Trader

Gold soared to a new all-time high overnight, coming within $20 of $4,200. But it met with some heavy selling once the European markets opened. This saw the price drop close to $100 (or 2%) in little more than an hour. It subsequently bounced back and was, at the time of writing, consolidating just below $4,150.

Source: TN Trader

Gold’s extraordinary move this year is the latest leg in a rally which, one could argue, began in 2015 when it was worth little more than $1,000 per ounce. If one accepts that premise, then it’s fair to say that the rally is long in the tooth. But others may argue with this, saying that most of gold’s gains have come over the last three years.

If one accepts that, then the rally could have much more to go. But if so, investors and traders should prepare themselves for a lot more volatility. All the easy gains have been made now, as gold, like the US stock market, took its time to take off, having steadily ground higher for a good couple of years, frustrating many holders. It remains very overbought, according to its daily MACD. As does silver.

Silver is living up to its reputation as gold’s unruly younger sibling. It also soared overnight to hit a fresh all-time intra-day high. But it too hit a wall of sell orders as Europe opened.

Silver hit $53.60 but then lost $3 in an hour or so, giving back 5%. So, volatility is up, market spreads are widening, and volumes are thinning. This may be a feature of the precious metals market as we get further towards year-end. That’s not to say gold and silver can’t go higher. But if they do, it’s going to be a much wilder ride from now on.

Source: TN Trader

Oil prices were sharply lower this morning as market participants contemplated the increased risks from trade tensions between the US and China. Front-month WTI fell below $57.50 to trade at its lowest level since early May.

Source: TN Trader

This morning’s move completely unwound gains from yesterday as oil bounced following Friday’s steep decline. The latter was triggered by President Trump’s trade threats to China, after China said that it was placing new restrictions on its exports of rare earths and other crucial minerals.

Despite this, Presidents Trump and Xi Jinping are still expected to meet later this month ahead of the Trump administration’s 1st November tariff deadline. But the real story of oil continues to be plentiful supply, while global demand growth continues to slow.

Earlier today, the International Energy Agency (IEA) released its monthly oil market report for October. It said that demand growth was set to slow further while supply was plentiful, thanks mainly to increased production from OPEC+ countries. Overall, the IEA anticipates continued surplus conditions in the oil market.

The crypto market slipped into softer territory as risk appetite faded again. Having pushed back above $115,000 yesterday, following Friday’s tariff-triggered sell-off, Bitcoin round-tripped back down to retest support around $110,000 today.

Ether was down over 8% as the US stock exchanges opened this afternoon. Prices dropped back below $4,000. The declines followed renewed caution in broader markets, prompting traders to trim exposure to high-beta assets.

Despite the recent record highs, upside momentum has clearly eased, with market participants showing less enthusiasm after an extended rally. The pullback underscores how sensitive the crypto space remains to shifts in sentiment across risk assets.

Stock market volatility pushed higher this morning with the VIX rising around 5%. This would suggest that the index is providing a mild warning sign that investor complacency may be fading. The move reflected renewed demand for protection after last week’s hefty market swings.

While the uptick wasn’t extreme, it suggested that traders are beginning to position more defensively ahead of upcoming events such as Fed Chair Jerome Powell’s remarks this evening. The overall tone remains watchful rather than alarmed, with volatility creeping back into play after an extended calm period.

US markets are coming off a strong rebound driven by President Trump’s reassuring tone over China, but stock index futures point to a softer open. The yen’s gains highlight renewed caution, while sterling remains under pressure after weak jobs data. Gold and silver look due for some consolidation following parabolic moves.

Attention now turns to Jerome Powell’s comments later today, following some mixed bank earnings reports from JPMorgan and Goldman Sachs. For now, sentiment remains fragile - optimism on trade and growth remains balanced by a healthy dose of scepticism.