Asian Pacific indices bounce back

All the major US stock indices ended Wednesday’s session in positive territory, led by a strong performance in small-cap stocks. The Russell 2000 added 1.5% having started the day trading at a three-week low. The tech-heavy NASDAQ closed up 0.7% as AI-linked companies steadied following some heavy losses earlier in the week. The Dow and the S&P 500 gained 0.5% and 0.4% respectively.

Source: TN Trader

The week began with doubts cast over the future returns on investments made in Artificial General Intelligence (AGI). Not only are the sums involved quite mind-boggling, but there are also concerns over the circularity of much of the investment. OpenAI, the world's largest privately-owned company by market capitalisation, and owner of ChatGPT, is often involved in these pledges. It is thought to have raised close to $60 billion, with two thirds of that coming from SoftBank alone.

Others heavily involved include Anthropic, Meta, ScaleAI, Amazon, Alphabet and, of course, Nvidia.

After Monday’s close, Palantir released a stellar set of earnings along with strong forward guidance for the fourth quarter. The stock flew higher initially, but then reversed sharply, for a high-low straight line drop of 18%. Analysts blamed the sell-off on Palantir’s extraordinarily high valuation.

But sentiment really took a hit after it was revealed that Michael Burry, a key player during the Great Financial Crisis as featured in ‘The Big Short’, was running large short positions on both Palantir and Nvidia.

Despite managing to push off its lows, Palantir’s stock price has not yet recovered and continues to test support around $188. Nvidia is down around 6% from Monday’s high.

Other tech names have bounced back a touch, with gains seen across chipmakers, helped by a strong set of results from Advanced Micro Devices. Qualcomm also released a positive earnings report, but gave back early gains overnight.

The US government shutdown continues and is now the longest on record. This has led to the cancellation of most official economic data releases, including tomorrow’s Non-Farm Payrolls. But yesterday’s ADP Payroll number came in above expectations, easily reversing last month’s losses.

The ISM Services PMI also beat forecasts to register the strongest rate of expansion since February this year. This better-than-expected data reinforces Fed Chair Jerome Powell’s warning last week that another rate cut in December was not a foregone conclusion. Indeed, the CME’s FedWatch Tool shows the probability of a quarter point cut at 67%, down from over 90% ahead of last week’s Fed meeting.

Investors are also keeping a close eye on Washington, DC, where the Supreme Court is considering the legality of President Trump’s tariffs. In the proceedings so far, the Court sounded sceptical that the Trump administration could legally impose tariffs, which effectively act as a tax on US consumers, without approval from Congress.

A ruling against the Trump administration could set the stage for a rollback of the policy. Some view such an outcome as bullish for equities, although that’s far from clear-cut.

Yields on US Treasuries jumped yesterday as investors reacted to the apparent scepticism of the Supreme Court. But even if the Court rules against the President, it seems likely that the administration will continue to push back, offering a different legal argument.

European stock indices were moderately weaker for the most part, although Spain’s IBEX broke the trend. The Spanish index has played catch-up with other European indices this year. The German DAX, French CAC, Euro Stoxx 50, and the UK’s FTSE 100 have hit a succession of record highs. But it was only at the end of last month that the IBEX took out its previous all-time high made back in 2007.

The focus this morning was on the Bank of England’s Monetary Policy Committee (MPC) as they debated whether to cut rates or not. A rate cut ahead of Chancellor Rachel Reeves’ budget on 26th November would have been viewed as highly political. And indeed, the MPC chose to keep rates unchanged at 4%. But it was a very close decision, with 4 members voting for a cut, and 5 for ‘no change’.

The UK's FTSE 100 drifted lower ahead of the rate decision but bounced sharply after the announcement. The tight vote in favour of ‘no change’ makes it much more likely that the MPC will cut rates at its next meeting in December.

Source: TN Trader

Forex markets were a touch livelier this morning, in contrast to the lack of activity in European trade earlier this week. Yesterday, the US Dollar Index tested resistance at 100.00, hitting its best levels since May this year. Not only is 100.00 a nice, round, psychologically important level, but it also acted as resistance in May and August this year.

So far, resistance has held, and the Dollar Index has subsequently retreated. The question now is whether this means that the dollar’s rally has topped, or if this is simply a brief pause ahead of another push higher.

In contrast, sterling found some support overnight ahead of the Bank of England’s rate decision. The Bank kept rates unchanged at 4.0%, as expected. Most analysts predicted that the Monetary Policy Committee (MPC) would prefer to hold off from cutting rates until after the budget later this month.

But earlier this week, some analysts suggested that the Bank may choose to cut by 25 basis points. This would be despite inflation running close to double the Bank’s 2% target.

In addition, if they had cut rates at this meeting, they ran the risk of it being viewed as a blatantly political move. It would certainly have helped the embattled Chancellor Rachel Reeves by cutting the cost of government borrowing. In the end, the MPC voted for no change by the slimmest of margins, with four out of nine going for a cut, and five against.

Yesterday, the GBPUSD dropped to a seven-month low before finding support just north of 1.3000. Sterling sold off following the decision but then recovered from its lows.

Source: TN Trader

Gold pushed higher for a second successive day to edge north of $4,000 per ounce. Recent dollar strength has been an excuse for buyers to stay away. But they have been encouraged to re-enter the market after the Dollar Index pulled back sharply from significant resistance at 100.00.

Gold must now face some resistance of its own around $4,040. While it’s not particularly significant, any sign that the upside may be capped around here could dent bullish sentiment.

On the positive side, gold has managed to consolidate around $4,000 for around a week now. This has helped the daily MACD to pull back to neutral levels, increasing the possibility that prices could make further gains.

Source: TN Trader

Silver was also firmer in early trade on Thursday, building on gains made yesterday. The daily MACD has pulled back to neutral levels and has started to curl higher. This is a good sign for the bulls.

But, as with gold, silver faces an area of resistance which it must break, and then hold above on any pullbacks, to have a chance of making further gains. This comes in around $49 per ounce, so it’s not a million miles away from current levels.

Source: TN Trader

Oil prices were a touch firmer in early trade on Thursday. Despite this, the overall bearish tone persists. Yesterday, front-month WTI broke and closed below support at $60 per barrel for the first time in over two weeks.

Source: TN Trader

The selloff followed yesterday’s US inventory update from the Energy Information Administration (EIA). This showed a sharp build in stockpiles instead of the expected drawdown. This reinforced the bearish sentiment that has dominated the market in recent weeks.

Traders continue to view the oil market as oversupplied, with rising inventories and softening demand expectations keeping a lid on prices, leaving crude struggling to find sustainable support.

Natural gas prices edged higher this morning, making back yesterday’s losses. The move reflected a continuation of underlying support in the market, though overall activity remained subdued. Despite the small uptick, traders are showing caution and awaiting clearer drivers before committing to fresh positions.

Cryptocurrencies were weaker in early trade, as some mild profit-taking came in following yesterday’s bounce. The continued weakness reflected uncertainty across risk assets, with crypto trading heavily influenced by the broader market mood rather than coin-specific developments. Volatility remained elevated across digital assets, underscoring the uneasy tone that has set in since the start of the week.

The VIX drifted lower as equity markets stabilised. Despite some market caution, overall volatility remains contained. Traders continue to monitor the index closely for signs of sentiment shifts, particularly as equities trade in a more two-way fashion. For now, the VIX remains elevated but stable, consistent with the cautious yet controlled tone across markets.

Wednesday’s rebound in US equities was driven by a combination of stronger data and a recovery in AI names. This helped sentiment stabilise after a volatile start to the week.

The Bank of England kept rates unchanged, as expected, but by the narrowest of margins. Crypto remains volatile while gold and silver are caught in a choppy two-way trade. Equity markets continue to show mixed signals. For now, two-way moves across assets offer something for everyone, but little in the way of clear conviction.