Asian-Pacific indices end mixed

Yesterday saw a tech-led rebound across Wall Street following last week's steep sell-off in chip stocks. Investors targeted many of the big losers in the semiconductor space, judging that the pullback was nothing significant, other than providing a ‘buy the dip’ opportunity.

The NASDAQ added 2.1%, while the S&P gained 1.2%. The small cap Russell 2000 ended effectively unchanged, and the Dow was up 0.6%, closing above 52,000 for the first time. Alphabet, Google’s parent, was added to the Dow yesterday morning, while Verizon fell out.

Source: TN Trader

Alphabet jumped around 3.5% on Monday while Verizon, which is involved in a joint venture with BT, fell 5.2%. So, ironically for the (formerly) ‘old school’ Dow, it was the inclusion of yet another tech giant that helped push it to a record close. But aware of its ancient history, the index remains resolutely price weighted, unlike just about everything else.

US stock index futures were a tad firmer across the board this morning, having pulled back from highs hit during the Asian-Pacific session. Investors will now await news from US/Iranian talks due to take place today in Qatar’s capital, Doha, according to President Trump, in response to Tehran’s request.

This sounds like progress, given the tit-for-tat hostilities which took place over the weekend. But no doubt investors will be wary of reading too much into post-talk comments, given the fractious nature of the US/Iran relationship.

Meanwhile, investors continue to assign an 80% probability of at least one 25-basis point rate hike from the Fed before year-end, with a 49% chance the first one comes in September. New Fed Chair, Kevin Warsh, will speak in Sintra, Portugal, tomorrow. So, analysts will be keen to hear what he says.

Although, given his comments at the monetary policy meeting just under a fortnight ago, he isn’t keen on giving a running commentary on Fed thinking, unlike many of his predecessors. JOLTS Job openings are released today, with ADP Payrolls tomorrow and Non-Farms on Thursday.

European stock indices were firmer across the board in early trade on Tuesday. All the majors were supported by gains in technology and industrial sectors as investors prepared for a busy day of second order economic data and some central bank commentary.

Mining stocks helped to lift the UK’s FTSE 100, and industrial goods companies were also upbeat, while ‘all things tech’, but especially chip stocks, attracted strong buying interest. The FTSE 100 is on course for its sixth successive positive quarter. Meanwhile, the FTSE 250 underperformed as housebuilding stocks came under pressure on reports of a multi-billion class action alleging sharp practice and collusion, which resulted in homebuyers overpaying for new build properties.

Source: TN Trader

Dutch tech giant ASML, the world’s leading manufacturer of equipment for making microchips, was up 3.5%. Investors will also keep an eye on the European Central Bank’s annual forum in Sintra, Portugal. Attention will be paid to newly appointed Federal Reserve Chair Kevin Warsh during his first major international appearance set for tomorrow.

Following a dip at the end of last week which stretched into Monday’s session, the US dollar has rebounded this morning. It has made gains versus all the majors in a move which has seen the cash Dollar Index push back above 101.00, keeping it on track to post its strongest monthly performance in nearly a year.

The dollar has been supported by the US Federal Reserve’s hawkish stance, which was emphasised at the last FOMC monetary policy meeting just under a fortnight ago. This was Kevin Warsh’s first monetary policy meeting as Chair.

He made it clear that the Fed’s focus was on price stability and on getting inflation back down to the Fed’s 2% target. Maximising employment, the other half of the Fed’s dual mandate, would have to take a back seat, for now.

The news led to a repricing in interest rate expectations for the rest of this year and beyond. This saw an increased probability of at least one 25-basis point rate hike before the end of 2026. This ongoing dollar strength is making life very difficult for the Japanese authorities.

Yesterday, the yen fell to its lowest level against the dollar in forty years, and it has weakened again this morning. Despite the Bank of Japan raising rates just two weeks ago, the yen continues to come under selling pressure.

Japanese officials have reiterated their readiness to act if currency moves become excessive, and it is understood that Finance Minister Satsuki Katayama has held talks with her opposite number in the US, Treasury Secretary Scott Bessent. This hints at the likely involvement of the US on any Japanese intervention to support the yen.

Source: TN Trader

Gold is desperately attempting to dig in and hold above $4,000. Bullish investors are keen to establish a base from which to stage a rally, and if they can build up support around $4,000, so much the better. Unfortunately, there are still committed sellers out there capable of inflicting significant damage to the gold price.

Overnight, they drove the precious metal down below $3,950 for the first time since early November. Yet buyers came in, and gold was soon back above $4,000 by the time European traders got to their desks. The correction in gold prices from January’s record highs is now five months old.

The daily MACD is in negative territory and in a shallow dive. Yet it is still way above the oversold levels seen at the end of March. So, unfortunately, it’s not telling us very much. The path of least resistance would appear to point down. But if bulls can dig in above $4,000, then that would increase the possibility of a recovery.

Source: TN Trader

Silver has also come under heavy selling pressure. However, it has managed to find some mild support around $55.50 - a level which acted as resistance back in December last year. It is also worth noting that silver’s daily MACD is back to the oversold levels seen in March. This is not to say that a low is in for silver. Far from it, as it’s far too early to tell.

Source: TN Trader

But if it is going to bounce, then the end of this five-month correction may not be too far away. Yet silver often surprises, and the last twelve months have demonstrated just how volatile it can be. Meanwhile, it must battle a rising dollar, which is getting support from the hawkish Fed.

Both WTI and Brent crude oil prices have flattened out over the past week. Having pulled back dramatically since mid-May, oil has been unable to make further downside progress. Yet buying interest hasn’t been sufficient to trigger any kind of rebound so far. This is quite surprising given the back-and-forth between the US and Iran, with negotiations showing remarkably little progress over the past month.

It’s even more surprising given the outbreak of hostilities at the end of last week and throughout the weekend. Despite this, traders seem convinced that the war is close to ending as both Brent and WTI have stalled out just north of their pre-war levels.

Source: TN Trader

There are signs that the Strait of Hormuz is gradually reopening, although it does feel as if Tehran is still pushing for some kind of toll on shipping passing through. President Donald Trump indicated that fresh talks between Washington and Tehran are expected to take place today in Doha. But that had not been confirmed by Iran at the time of writing.

Bitcoin continued to trade south of $60,000 and within shouting distance of the lows hit back in October 2024. It remains weighed down by a combination of sustained institutional selling and expectations for higher US interest rates. The Federal Reserve’s hawkish stance has further pressured crypto markets, as higher interest rates increase the opportunity cost of holding speculative, non-yielding assets.

Ongoing uncertainty surrounding US-Iran relations has also encouraged investors to remain selective with risk exposure. Meanwhile, artificial intelligence-related equities continue to attract capital despite recent volatility. Bargain buying in major technology names has diverted investor attention away from cryptocurrencies, limiting Bitcoin’s ability to mount a meaningful recovery.

Market sentiment has improved following Monday’s rally, and risk appetite is showing signs of stabilisation. Technology stocks rebounded strongly, helping the Dow Jones Industrial Average reach a fresh record high, while broader equity markets benefited from easing geopolitical tensions.

Attention now shifts to peace talks between the US and Iran, as well as to economic data, particularly the US labour market releases scheduled throughout the week. Thursday’s nonfarm payrolls report will be especially important, given the US market holiday on Friday. Investors are looking for further clues on whether the economy remains strong enough to justify additional Federal Reserve rate hikes.

Currency traders remain focused on the Japanese yen, where intervention concerns continue to compete with widening interest rate differentials. Meanwhile, commodity and precious metal markets are likely to remain highly sensitive to developments in US-Iran negotiations and shifting expectations for monetary policy.

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