Asian-Pacific markets mixed

Yesterday, US stock indices added to gains made from Monday’s sharp rally. Once again, it was the tech sector which took the lead with the NASDAQ up 1.5% on the day while the S&P 500 added 0.8%. The Dow and Russell 2000 tacked on 0.3% and 0.5%, respectively.

This capped off an impressive first half for the year, with semiconductor stocks helping the NASDAQ to a 12.8% gain since the start of the year. The S&P added 9.6% while the Dow made 8.9%. But it was the small cap Russell 2000 which outshone the lot, as it jumped 22%, posting its best first half since 1991.

Source: TN Trader

US stock index futures were a tad lower this morning, pulling back from yesterday’s close. There were some modest losses across semiconductor stocks in early trade, following a stunning first half for the year, which saw the iShares Semiconductor ETF post a gain of 112%. Yet ‘Magnificent Seven’ constituents appear to have lost some of their shine, particularly over the last month or so.

Some analysts suggest that this could be a warning for the wider market. Yet others see the upcoming earnings season as yet another opportunity for corporations to show another quarter of outsized earnings growth. If so, they believe that this could be the trigger for a big rally across ‘Mag 7’, which would see the group become market leaders once again.

In the meantime, investors are considering a future environment with higher borrowing costs. Two weeks ago, at the Fed’s first FOMC meeting with Kevin Warsh as Chair, it became apparent that the US central bank had become more hawkish than under its previous Chair, Jerome Powell.

Mr Warsh emphasised that the Fed was focused on getting inflation back down below its 2% target, even as Core PCE just came in at 3.4% for May. That would suggest that the Fed is less concerned about the other half of its dual mandate, ensuring maximum employment.

Yesterday’s JOLTS Job Openings were encouraging, while there are updates on ADP private payrolls today, and the official Non-Farm Payrolls tomorrow. In addition, Kevin Warsh will be speaking at the European Central Bank Forum in Portugal today. It will be interesting if Mr Warsh is as tight-lipped about monetary policy as he promised to be a fortnight ago.

Meanwhile, the US and Iran are in Doha for peace talks, although the two sides have yet to meet.

European markets opened lower on the first trading day of the new quarter, with investors balancing concerns about economic growth against ongoing strength in selected sectors. Chemicals led gains, advancing approximately 1.1%, while automakers added 0.42%. However, concerns surrounding Europe’s automotive sector continued to dominate discussions.

Source: TN Trader

Volkswagen’s recent announcement that it plans to cut 100,000 jobs and close four German production facilities has highlighted the mounting pressures facing European car manufacturers. According to industry analysts, Chinese automakers are capturing market share at a faster pace than previously expected as domestic demand in China weakens and manufacturers increasingly target overseas markets.

European automakers were among the region’s weakest-performing sectors during the second quarter, with the Stoxx Europe 600 Autos Index falling more than 5%. Investors remain concerned about slowing demand growth, increasing competition and ongoing margin pressure across the industry.

The US dollar was stronger across the board this morning. This follows a week-long period of consolidation after a sharp spike in the greenback a fortnight ago. The dollar got a boost on an unexpectedly hawkish Federal Reserve monetary policy meeting, the first with Kevin Warsh as Chair.

The cash Dollar Index smashed through resistance at 100.00 and went on to break above 101.50 this time last week. It then pulled back a touch on profit-taking but has now recovered to trade above 101.00 again.

According to the CME’s FedWatch Tool, there’s an 83% probability of at least one 25-basis point rate hike this year, and a 50% chance of a rise as soon as September. Recent economic data has reinforced those expectations. The US economy appears to be zinging along at an impressive rate, and unemployment remains near historically low levels. It is only high inflation that is the big fat bluebottle in the ointment.

Today sees the release of more labour data, with ADP Private Payrolls. These come ahead of tomorrow’s Non-Farm Payroll update. Also today, Fed Chair Kevin Warsh will be speaking at the European Central Bank Forum in Portugal. But from what he said at the Fed meeting two weeks ago, analysts shouldn’t expect him to provide much insight into his thoughts on interest rates, or much else besides.

Meanwhile, the strong dollar is proving a nightmare for Japan’s policymakers. The Japanese yen hit a fresh forty-year low overnight, which saw the USD/JPY trade above 162.80. This is well above the levels hit back in April, which triggered the last round of intervention from Japan’s Ministry of Finance. And it all increasingly appears like a game of chicken between traders and the authorities as to when intervention may take place.

Source: TN Trader

Finance Minister Satsuki Katayama and Chief Cabinet Secretary Minoru Kihara have both repeatedly warned that they are prepared to intervene if currency moves become excessive. Despite this, investors continue to favour the dollar due to the significant interest rate differential between the US and Japan.

Low Japanese interest rates mean that it's cheap to borrow yen and then use the proceeds for leveraged trading, known as the ‘carry trade’. Intervention to support the yen can be very unpleasant for those involved in the ‘carry trade’. They may be hoping that Japan leaves the yen alone, hoping that the selling will ease off. Alternatively, the Ministry of Finance may decide to act on Friday, when many traders will be away for the US holiday.

Gold took another punch to the guts overnight as selling pressure drove it back down below the key $4,000 level. Gold bulls will be hoping for a quick bounce-back, which would help reestablish the significance of $4,000 as support. The rebound in the US dollar after a week-long consolidation didn’t help gold’s cause. And as things stand, it will take something quite big to take the wind out of the sails of the dollar’s rally.

Source: TN Trader

That could come today with the publication of the latest ADP Payroll data, or on the back of something Fed Chair Kevin Warsh says during his speech in Portugal this afternoon.  But two weeks ago, Mr Warsh made it clear that the Federal Reserve was focused on tackling inflation and driving it back down to the Fed’s 2% target. That looks likely to require a rate hike or two.

Silver gave up its gains from yesterday, dropping towards $57 per ounce overnight. It has recovered a touch this morning and continues to trade around a mild area of support, which stretches down to $55.50 at its lower end. This area acted as resistance in early December last year, and silver has managed to cling on above here during this latest selloff.

Silver remains very oversold according to its daily MACD, so a rebound can’t be ruled out. But if it were to make a protracted break of current support, then the charts suggest that it could drop back to $54 or thereabouts. Like gold, the silver bulls aren’t getting any help from the stronger US dollar.

Source: TN Trader

Crude oil was lower as lunchtime in London approached, giving back modest gains from earlier in the session. Front-month (September) Brent dropped back below pre-war levels in a move which will provide much relief across Europe and the UK.

Source: TN Trader

It is also worth noting that a slight contango has reappeared across the futures markets. This indicates a return to normality and contrasts with the steep backwardation that existed throughout the earlier part of the US/Iran war. This came about as investors consistently priced in lower oil prices towards the end of the year on expectations that the war would end soon.

Well, after four months, there’s a ceasefire of sorts. Although at the time of writing, face-to-face meetings between the US and Iran in Doha have not taken place. But oil traders are taking some comfort from an easing up in the blockade across the Strait of Hormuz.

Some shipping is passing through, although it’s unknown on what terms. It still appears that Tehran wants to charge a fee to escort vessels through the Strait, although the Trump administration insists this can’t be part of any peace deal. Yet that could be a stumbling block, even before there’s any discussion over what happens to Iran’s enriched uranium.

In the early hours of this morning, Bitcoin dropped below $58,000 to hit its lowest level since September 2024. This was just a matter of weeks before Donald Trump won a second term in the White House, ushering in a crypto-friendly administration which saw bitcoin hit an all-time high of over $126,000 in October last year. It all seems a world away now.

Bitcoin has lost over 50% of its value since then. Investors have lost interest in cryptos, which have spent the last eight months correcting downwards. Bitcoin has lost its edge as investors are no longer bothered by what was once seen as the gleaming tech response to currencies which are continually debased by unlimited printing.

Instead, investors continue to pile into semiconductors and anything else related to the development of AI. Sentiment wasn’t helped by news that Strategy, the original bitcoin treasury company, was selling bitcoin. This was something that company founder, Michael Saylor, said would never happen.

Markets enter the new month and quarter with a cautious tone despite the strong gains recorded during the first half of 2026. US stock index futures suggest investors may take a more measured approach as they assess economic data, central bank commentary and ongoing geopolitical developments.

The key event on Wednesday will be the ADP employment report, with expectations centred around 120,000 new private-sector jobs. Investors will also monitor ISM manufacturing data before attention shifts to Thursday’s highly anticipated nonfarm payrolls report, which is expected to show employment growth of approximately 115,000 jobs.

Federal Reserve Chair Kevin Warsh will be closely watched during the ECB’s central banking forum alongside ECB President Christine Lagarde and Bank of England Governor Andrew Bailey. Any comments regarding inflation, growth or future policy adjustments could significantly influence market expectations.

Meanwhile, investors continue to monitor two markets sitting at critical levels: the Japanese yen and Bitcoin. Both remain under intense scrutiny as traders weigh the impact of policy decisions, capital flows and broader risk sentiment.

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