European markets edge lower in early trade

US equities closed higher across the board on Monday, pushing through soft ISM manufacturing data and renewed trade tensions with China. The S&P 500 climbed 0.4%, the Nasdaq Composite advanced 0.7%, the Dow rose 0.1 and the Russell 2000 ended up 0.2%.

Source: TN Trader

Stock indices began yesterday’s session in negative territory following President Trump’s accusation over the weekend that China had already broken promises on trade. But investor risk appetite strengthened into the close, as investors continue to consider ‘buying the dip’ as a reliable trading strategy.

Risk sentiment took a knock following headlines from Beijing, which pushed back against President Donald Trump’s accusations that it had violated the terms of a temporary trade agreement. The development raised fresh concerns that negotiations between the two nations may be faltering, reversing earlier hopes of a constructive path forward. 

Still, markets appeared to take the news in stride, suggesting traders believe diplomatic efforts will continue.

Despite the underlying tensions, Monday’s session reinforced the broader narrative: investors remain willing to look past near-term geopolitical noise, especially in a landscape where major indices are within striking distance of record highs.

Asian Pacific stock indices were generally firmer overnight. Hong Kong’s Hang Seng and the Shanghai Composite rose 1.5% and 0.4% respectively, while Australia’s ASX 200 rose 0.6% as investors responded to yesterday’s positive turnaround across US stock indices. 

But Japan’s Nikkei closed modestly lower, closing down 0.1%. Continued concerns over China-US trade tensions and renewed EU tariff talks kept a lid on prices. Chinese equities were up despite a private PMI reading which dipped below the 50-point expansion threshold, signalling that investors were willing to look past signs of contraction.

The overall uptick in Asia reflected carry-over optimism from the US session, where late-day buying helped lift sentiment.

FX markets reflected the current cautious environment. Despite this, the US dollar recovered a fair proportion of yesterday’s losses, with the Dollar Index pushing up from the six-week low hit yesterday morning. Despite this, the US dollar remains significantly below recent highs, while the charts lack clarity at this point.

Cable continued to hold above 1.3500, supported by better-than-expected UK house price data, while the euro was trading around 1.1400 against the dollar. The USD/JPY weakened slightly overnight, trading below 142.00 in early trade as investors retreated from safe-havens.

Source: TN Trader

Overall, FX moves were subdued this morning, suggesting that traders are waiting for more decisive cues from trade developments and upcoming economic releases.

Gold retreated modestly after its 2% surge on Monday, which took prices to a one-month high. Overnight, gold pulled back from its intra-day peak just below $3,400, and was, at the time of writing, testing the area around $3,360 (formerly resistance) as support. The earlier rally had been driven by investors ploughing funds back into perceived safe-havens amid renewed trade-war jitters.

Source: TN Trader

With geopolitical uncertainty still simmering, gold remains sensitive to headline risk, though the recent pullback indicates that traders are locking in some profits after the sharp move higher.

From Friday’s close to yesterday’s high, front-month WTI gained close to 5% before pulling back. WTI traded above $63 per barrel before easing into the close. Traders reacted positively to the news that OPEC+ would increase output by another 411,000 barrels per day in July. This figure was below expectations.

Source: TN Trader

Traders appeared to be balancing concerns over geopolitical disruption with the reality of growing output.

Cryptocurrencies traded higher but without a great deal of bullish conviction. Bitcoin continued to find support around the $102,000 - $104,000 area but is still some way short of the all-time high just below $112,000 from last month. 

Ether continues to show resilience, building support around $2,500 as it continues to consolidate. This follows its sharp rally from early April, when it was trading below $1,400. 

The Volatility Index traded flat around 20.00, down slightly from Monday’s levels. Despite fresh headlines around trade tensions and mixed economic data, volatility has yet to spike materially.

A reading below 20 suggests that, for now, investors feel relatively comfortable absorbing uncertainty without demanding a large premium for protection. However, the VIX remains elevated by historical standards, indicating that any sudden shock could still provoke a swift move higher in market-wide volatility.

The Trump administration has set Wednesday as the deadline for trade offers from other countries, suggesting several deals could soon be completed. China’s own deadline for reciprocal measures has been pushed out to the end of August, leaving a clear timeline for markets to watch.

In corporate news, Meta rejected Bitcoin as a reserve currency, choosing instead to ride an AI-driven surge in its share price. Deutsche Bank expects the ECB to cut rates on Thursday, which has already been partially priced in by G10 futures.

Today’s economic calendar features EU CPI inflation and US JOLTS Job Openings, while Friday’s Non-Farm Payrolls remain the standout data point for the week. On the earnings front, Dollar General and Nio are due to report, with analysts eyeing their results for cues on consumer spending and EV trends.

Investors have brushed aside weak data and tariff headline noise, pushing equities higher. The dollar remains on the back foot, though overnight gains indicate it may be finding some support near the 99 level. 

Gold and silver continue to exhibit strength after Monday’s rally, while oil and gas are reacting to a mix of supply updates and geopolitical risks. Crypto’s muted range trade suggests that traders are bracing for the next catalyst. 

With major economic releases and trade-war deadlines looming this week, volatility could pick up again - but for now, markets appear poised to test fresh highs.