Asia Pacific mostly firmer

US stock indices ended Wednesday’s session mixed. The Dow outperformed once again, adding 0.7% to take it to yet another all-time high. The S&P 500 eked out a more modest 0.1% gain, while both the NASDAQ and Russell 2000 lost 0.3%. The blue-chip, old school, price-weighted Dow continued its strong run as investors rotated out of tech and into value and defensive sectors, with healthcare once again in demand. This offset some weakness across growthy tech names.

Source: TN Trader

The NASDAQ has lost some of its upside momentum recently, weighed down by wariness over stretched valuations and the circularity of investment across the Artificial Intelligence (AI) space. Nvidia has been a particular focus. The chip designer has been at the forefront of the march to Artificial General Intelligence (AGI), with its complex chips an integral part of its development.

It was the first company in history to hit a market capitalisation of $5 trillion. But its share price has taken a bit of a knock over the past fortnight, and its market cap has fallen back to $4.7 trillion, which still makes it the most valuable company in the world.

Investors became net sellers after it was revealed that Michael Burry, who anticipated the housing bust which triggered the Great Financial Crisis of 2008/9, announced that he had large short positions in both Nvidia and Palantir, another great favourite with tech traders.

Suddenly, cracks appeared in the AGI trade. This was exacerbated after Japan’s SoftBank announced that it had liquidated its entire Nvidia position. Although nerves were settled to some extent as SoftBank only sold out of Nvidia to increase its exposure to OpenAI, the owner of ChatGPT.

There was a softer bias across US stock index futures in early trade on Thursday. This was despite a 7% gain in Cisco overnight after the company posted stronger-than-expected earnings and a surge in AI-related orders. But the big story came from Washington, DC, where President Trump signed a funding bill that officially ended the longest government shutdown in US history.

The breakthrough came on Sunday in the Senate. But it was confirmed when the House of Representatives passed a short-term solution by a narrow margin. This brought an end to six weeks of gridlock that had left investors, economists and the Federal Reserve flying blind without key data releases, principally those which measure inflation and the state of the labour market.

Government workers were told to return to their jobs today, and it may not be too long before the market gets a ton of confusing economic data releases. But investors are taking this in their stride. If the data is good, then there’s nothing to worry about, and the buying can continue. And if it’s bad, then investors can look forward to easier monetary policy.

Mr Powell may have said that a December cut wasn’t a foregone conclusion. But if the data is poor, particularly the jobs numbers, then it’s likely to happen.

European stock indices were mixed in early trade on Thursday. Overall, global stock markets reacted positively to news of the US government’s reopening. This helped the French CAC power to a fresh all-time high, while Spain’s IBEX also pushed up to a new record.

In contrast, the German DAX lost ground as Siemens Group, a major constituent, dropped 5%. The selloff came despite a decent set of earnings and was linked to news that the company would reduce its stake in Siemens Healthineers AG from 67% to 37% via a transfer of shares to its own shareholders.

Source: TN Trader

The UK’s FTSE also pulled back from yesterday’s all-time intra-day high. This followed the release of another set of poor GDP numbers. Unfortunately, the data will be of little comfort to anyone, least of all the Chancellor of the Exchequer ahead of her budget in less than a fortnight’s time. GDP growth was tepid and trending in the wrong direction.

In addition, there was little joy to be found in Industrial Production or Manufacturing Production either, while a hoped-for bounce-back in Business Investment failed to materialise.

The only bright spot was an uptick in Construction. But given yesterday’s grim jobs numbers, which continue to show the pain caused by Ms Reeves’ hike in employer national insurance, the best hope is that inflation has finally topped below 4%. This would give the Bank of England enough cover to cut interest rates next month. Unless, of course, the Chancellor decides to hike VAT, in which case, all bets are off.

Currency markets were quite lively this morning, with the US dollar a major focus. The dollar was weaker across the board, with the Dollar Index trading back below support, which had been holding around 99.00.

Just over a week ago, the Dollar Index was trading at 100.000, its highest level since May. It had rallied over 4% since mid-September when it briefly broke below 96.00 and appeared to be on the brink of breaking out to the upside. But 100.00 turned out to be a significant level of resistance, and prices have pulled back sharply from there.

It now appears that the US dollar will need to pull back more or at least consolidate before it can make further upside progress. It will be interesting to see if it can push back above 99.00 ahead of the weekend.

The weaker dollar helped to steady the British pound, with the GBP/USD trading around 1.3150. The Australian dollar was also strong, supported by the better-than-expected jobs report. The improvement in the labour market eased immediate pressure on the Reserve Bank of Australia to cut rates further. Meanwhile, the Japanese yen was little moved with the USD/JPY trading just south of 155.00.

Source: TN Trader

Gold flew higher again this morning, extending this week’s rally. It pushed back above $4,200 as upside momentum continued to build, as shown by the daily MACD, which is curling up. Just over a week ago, gold was trading well below $4,000, having fallen to $3,935.

Since then, it has rallied around 8% and is on course for its eighth consecutive positive session. That’s quite a run, and flies in the face of the cautious attitude taken by many players who had expected more of a pullback.

That could still happen, of course. After all, markets generally perform in a fashion which makes the biggest fools out of the largest number of traders possible. Gold is currently bumping up against a slight area of resistance, previously support back in October, around $4,220-$4,240.

Source: TN Trader

Silver has put in an astonishing rally over the last nine days. In early November, it broke back below $47 per ounce, having recovered from its slump to $45.55 the week before. Like gold, it has had an unbroken upside run ever since.

This morning it traded at $54.39, coming within 25 cents of its all-time high from mid-October, adding over 15% from early last week. Its daily MACD has turned up sharply, suggesting that there’s strong upside momentum.

But given the size and speed of this latest rally, there must be concerns that another pullback may be on its way. However one looks at it, silver is living up to its reputation as gold’s unruly sibling.

Source: TN Trader

Oil prices slumped yesterday, in a move which took front-month WTI down from close to $61 per barrel to within a few cents of $58. The bulk of the selloff came midway through Wednesday’s session and appeared to be linked to an updated supply forecast from OPEC.

Source: TN Trader

The group said it now expects a small surplus in supply in 2026 (in line with most other agencies), having previously forecast a deficit. This view was echoed by the Paris-based International Energy Agency (IEA), which currently forecasts a crude oil surplus of over 4 million barrels per day, when compared to its prediction for future global demand growth.

Prices steadied this morning, although sentiment remained cautious ahead of today’s weekly US inventory report from the Energy Information Administration.

Natural gas prices pulled back modestly after testing resistance around highs last seen in March this year. The pullback reflected a pause in momentum rather than a shift in direction, as prices have enjoyed strong support in recent weeks.

 While buyers have remained active on dips, the inability to sustain gains above March’s closing high signalled some hesitancy to take prices up further. It looks as if further consolidation is required.

Bitcoin made back yesterday’s losses in early trade this morning and is showing some welcome signs of consolidation at lower levels. Bitcoin has fallen dramatically since it hit an all-time high above $126,000 in early October. Last week, it broke below $100,000 on several occasions. Despite this, it managed to hold above this level on a closing basis each time.

The daily MACD is trundling along at oversold levels. But if Bitcoin can continue to consolidate north of $100,000, then this could take some wind out of the doomsayers’ story. Ether faces a similar situation. It managed to hold above $3,000 during its selloff and is managing to consolidate around $3,500 so far.

The VIX remained subdued, reinforcing the view that volatility across markets has eased considerably. The muted reading reflected the broad sense of calm now settling in following weeks of political uncertainty, thanks to the US government shutdown, which has now ended. Markets are also calmer as Nvidia steadies following its recent pullback. Investors were also cheered by a positive third quarter earnings season.

The end of the US government shutdown has provided a clear psychological lift to markets, though much of the optimism was arguably priced in ahead of the official announcement. Cisco’s strong earnings and upbeat AI order book boosted sentiment further, reinforcing the view that corporate fundamentals remain solid.

Gold and silver continued to rally, echoing a pattern seen earlier in the month, while equities held firm as the bulls regained full control. Whether this strength can extend into another leg of a rally remains to be seen. But for now, market momentum appears tilted to the upside.