Asia Pacific markets rebound

US stock index futures were sharply higher in early trade this morning, in a move which saw all the majors gap higher from Friday’s close. Investors reacted positively after the Senate passed the first stage of a deal that could pave the way to ending the longest ever US government shutdown.

Eight Democratic senators broke with their party’s leadership to support the latest motion, thereby hitting the 60-vote threshold required. Investors are hoping that this Senate breakthrough will see the bill get passed by the House of Representatives later this week, for ultimate sign-off by President Trump.

If all goes well, some federal agencies could reopen as soon as Friday. The vote came late on Sunday and has boosted sentiment following a fraught start to November trading. Last week, the tech sector took a hit after it was revealed that Michael Burry, of ‘The Big Short’ fame, had taken out a large short position on Palantir, along with a slightly smaller one on Nvidia.

The news led to a sharp and protracted selloff in both stocks, while investors also cut their exposure to other companies at the forefront of the Artificial General Intelligence (AGI) trade. This brought losses for all the major US stock indices.

The NASDAQ fell 3% last week, posting its worst performance since April during the ‘Trump Tariff Tantrum’. The Russell 2000 fell 1.9% while the Dow and S&P 500 ended the week down 1.2% and 1.6% respectively. Yet all the majors had recovered from lows hit on Friday, even as the University of Michigan’s Consumer Sentiment survey fell to its lowest level since June 2022.

Source: TN Trader

Market participants are hoping that the end of the shutdown will lead to a resumption in the collection and release of the government’s economic data updates. Everyone, from traders to the Federal Reserve, has been flying blind since the beginning of October, with a near-complete absence of data covering inflation and the labour market. Of these, the Fed has made it clear that their concerns about a weakening jobs market trump those over inflation.

But Fed Chair Jerome Powell has played down the prospect of another rate cut in December, as it is far from obvious that inflation has peaked. Both Headline and Core CPI continue to hold around 3%, well above the Fed’s 2% target.

European stock indices were firmer across the board on Monday, gapping higher from Friday’s close. The gains came as investors reacted to news of a Senate breakthrough to end the US government shutdown.

Source: TN Trader

US stock index futures jumped in early trade, and there were also gains for Asian Pacific equities. This all followed a difficult week for stocks. The tech sector took a rare dive on concerns of overvaluation, the circularity of investment and questions over whether all the promises of investment in Artificial Intelligence could be justified by future revenue streams.  

Late on Sunday, a vote in the US Senate cleared the way for further discussions on a bipartisan deal to end the government shutdown. This has raised hopes that federal agencies could soon reopen, easing a key overhang on markets.

In Forex, news of progress to end the US government shutdown led to a sharp rise in risk appetite. This expressed itself with a rally across currencies with exposure to commodities, such as the Australian and Canadian dollars, and a pullback in safe havens, such as the Japanese yen and Swiss franc.

The Japanese yen weakened as investors rotated back into higher-yielding currencies, reflecting a shift away from defensive positioning. The USD/JPY pushed back up towards recent highs, even as the Bank of Japan indicated that it was prepared to raise rates soon.

Source: TN Trader

Meanwhile, the Dollar Index was little changed. Last week, it hit its highest level since May this year as it briefly touched 100.00. But this level once again held as resistance, and the Dollar Index then pulled back towards 99.00.

Much will now depend on what happens from here. If the Index holds 99.00 as support on any further weakness, then a retest of 100.00 seems quite possible. But it could be that the dollar becomes rangebound once again, given that the daily MACD is quite elevated at current levels.

Gold flew higher overnight, extending its recent advance. Gold was up close to 2% in early European trade, hitting its best levels in around two weeks. It has now added almost 4% from its low last Tuesday, and the chart is starting to look quite constructive from a bullish perspective.

But it also looks as if there’s a touch of resistance around $4,100, which will need to be taken out in a decisive fashion for bullish sentiment to continue to improve. The daily MACD looks quite supportive.

Source: TN Trader

Although early days, it has certainly pulled back from the overbought conditions seen three weeks ago. It has hit the neutral level and has started to curl up. While this is no guarantee that the current rally has legs, it does suggest some increase in upside momentum.  

Meanwhile, silver outperformed gold this morning, tacking on over 3% from Friday’s close as it pushed up towards the $50 level. Silver also hit a low last Tuesday and has rallied steadily ever since, adding around 6% since then.

Its daily MACD has gone from very overbought three weeks ago, back to neutral. And, like gold, it has curled up a touch thanks to the gains made over the past few sessions. $50 per ounce may act as resistance, particularly as the last time silver traded here was during its slump off its all-time high from nearly three weeks ago.

Source: TN Trader

Oil prices pushed higher on Monday, with front-month WTI once again reclaiming $60 per barrel. This came as optimism over the Senate’s breakthrough in Washington lifted overall market sentiment. The rebound provided some relief for the energy sector, which has faced weeks of pressure from concerns about oversupply and weakening demand.

Source: TN Trader

Crude’s modest gains reflected both improved risk appetite and some short covering after recent declines. Prices have come under repeated selling pressure over the last two weeks, and this is starting to erode the gains made after the sharp bounce in mid-October.

It’s also worth noting how negative sentiment is towards crude currently. That could mean that prices have further to fall. But at some stage, the sellers will exhaust themselves, meaning that it wouldn’t take much buying to see prices jump.

Still, sentiment remains cautious for now, with investors aware that broader market imbalances and slower global growth could continue to cap upside momentum.

Natural gas prices advanced sharply, climbing 4% at one stage, as bullish momentum carried over from last week. The move extended the recent run of strength in the energy complex, with traders positioning for firmer demand expectations and improved overall sentiment across commodity markets.

Trade was volatile, as gas prices held near their session highs at levels last seen in March this year, supported by speculative buying and a steady improvement in investor risk appetite.

Bitcoin rallied sharply overnight. Last week, Bitcoin fell below $100,000 on several occasions. But this level managed to hold as support on a closing basis. This was encouraging for dip-buyers, as was the fact that the last time Bitcoin was this oversold, according to its daily MACD, was in March/April this year, when prices fell to $75,000.

Just under a week ago, Ether fell back towards $3,000. But it found buyers around this level and, like Bitcoin, looked oversold according to its daily MACD.

The recovery in digital assets reflected the same renewed optimism that lifted equities and commodities, as traders grew more comfortable re-entering higher-risk positions after several cautious sessions. Despite the volatility, crypto markets showed signs of stabilising, with major coins holding above key psychological levels as the week began on a more constructive note.

Market volatility has eased significantly since Friday, with the VIX index falling more than 3% as investor confidence improved following signs of progress in Washington. The decline reflected a notable shift in tone after several sessions of heightened caution tied to the government shutdown.

While uncertainty remains until a formal funding agreement is finalised, the drop in the VIX suggests that traders are beginning to unwind defensive hedges. The move lower in volatility aligns with broader market trends, where equities, commodities and crypto assets have all responded positively to signs of resolution.

The recent pullback across equity markets proved brief, as many anticipated. Stock index futures are already pointing higher on the “buy the rumour” trade, with investors positioning for confirmation of a Senate vote to reopen the government through January. Risk appetite has returned, spilling into metals, energy and crypto markets. Technology could be the standout beneficiary if this momentum continues.