Asian Pacific markets rally

US stock indices rebounded on Friday following a very weak start. All the majors fell during the Asian Pacific session, taking them down to their lowest levels since President Trump’s tariff threat against China led to the stock market slump the previous week. But markets began to recover as the European session got going.

Most of the major indices closed the session with gains and near their highs for the day. The only exception was the Russell 2000 which couldn’t quite make it into positive territory. Small caps were a touch out of favour as traders rushed back into big tech instead.

Despite it being a rocky week which saw stock market volatility spike higher, there were broad-based gains as investors took advantage of the prior week’s sell-off to reload their portfolios with some major stocks at cheaper prices. For the week, the Dow added 1.6%, the S&P tacked on 1.7%, while the NASDAQ and Russell 2000 gained 2.1% and 2.4% respectively.

Source: TN Trader

Overnight, US stock index futures extended last week’s gains. Traders have responded to an apparent softening in rhetoric concerning the reigniting of the trade war between the US and China. China had previously announced further restrictions on the export of critical minerals, over which it has a virtual monopoly. This led President Trump to threaten additional 100% tariffs on all US imports of Chinese goods. But last week saw both sides, but mainly the Trump administration, back down to some extent, although the situation remains fluid.

Investors are betting that the two sides will come to a rapprochement ahead of the Trump administration's 1st November deadline. Supporting the positive tone was a Wall Street Journal report indicating that President Trump has exempted dozens of products from reciprocal tariffs and is considering additional exemptions.

This development aligns with growing internal support within the administration for reducing duties on goods not produced domestically, a sign of a possible softening in trade policy. US Treasury Secretary Scott Bessent has made some encouraging noises and has stated that Presidents Trump and Xi Jinping are set to been later this month in South Korea. But there’s still plenty going on out there which has the potential to upend the equity market.

There are concerns that a lack of oversight, together with leveraged speculation and outright fraud, may be undermining the banking sector. Last week, Zions Bancorp revealed a loss of $60 million in fraudulent commercial loans.

Western Alliance also came under fire for similar fraudulent loan exposure. The news led to a sharp sell-off across US regional banks while larger investment banks also came under pressure. This followed the collapse of First Brands, a large US auto parts manufacturer, closely tied into private credit. Over $2 billion was reported missing, and more than $10 billion is owed to creditors, including Jefferies, JP Morgan and other global lenders.

Tricolor Holdings, a subprime auto lender and used-car retailer, filed for Chapter 7 bankruptcy in September 2025 after lenders uncovered a massive case of double-pledging fraud.  On top of this, the US government shutdown is about to enter its fourth week, and one of the consequences of this is the lack of economic data.

Having said that, it looks as if the September CPI report could be released this Friday. The third quarter earnings season is picking up a gear. This week sees the release of numbers from Netflix, Coca-Cola, Tesla, IBM, Intel, Blackstone and Procter & Gamble, amongst others.

Overall, concerns over regional bank losses and the pullback in high-flying AI stocks initially weighed heavily. But solid corporate earnings, particularly from the big banks, ironically, helped steady sentiment. Also, the uptick in volatility has increased the probability that the Fed will cut rates by 50 basis points before year-end.

European stock indices were mixed when they opened on Monday, following a volatile week that saw investors juggle concerns over US bank losses and global trade tensions. But they began to push higher as the morning session progressed.

The German DAX led the rally, gaining over 1% at one stage, helped along by some hefty gains in defence stocks. These moves follow on from President Trump’s weekend meeting with Ukraine’s President Zelensky. It appears that the US president has shifted his position again and is in no mood to send Ukraine the weapons that it wants and needs to inflict serious damage on Russia’s defences and energy infrastructure.

The French CAC was down a touch. French banking giant BNP Paribas lost around 10% after a US jury decided that it had helped the Sudanese government commit genocide by providing services that broke US sanctions.

The CAC had been Europe’s outstanding performer last week, gaining over 3% while other countries’ stock indices lost ground. This came as the French Prime Minister won two ‘no confidence’ votes after he kicked proposed pension reform into the long grass. Otherwise, last week’s weakness stemmed largely from concerns over US regional banks, which had reverberated through global financials.

Source: TN Trader

There was a very quiet start to FX this morning, with most pairs relatively little changed. Along with US equities, the Dollar Index rallied off lows hit on Friday to push back above 98.00.

Earlier in the week the Dollar Index had traded above 99.00. The move suggested that the greenback was on the path to recovery following a dismal performance over the previous nine months. But investors rushed to dump the dollar as they responded to the news of bad loans and fraud across the US banking sector.

Source: TN Trader

The immediate danger seems to have passed as investors are convinced that the bankruptcies, bad loans and fraud accusations are all isolated incidents, and not part of widespread failings within the banking sector. Time will tell. With the US dollar steady, most major currency pairs held within tight ranges, showing no clear directional conviction.

For now, the focus remains on broader risk sentiment, which has improved modestly, helping to stabilise the dollar after recent swings.

Gold was little changed in early trade this morning. On Friday it had its biggest one-day sell-off since May by my calculations. Gold fell by as much as 3% and briefly broke below $4,200 on Friday evening before buyers stepped in to stabilise prices.

Yet despite the brief pullback, gold continues to trade at elevated levels, maintaining its status as a preferred safe-haven asset, given the current global uncertainty and shifting risk sentiment. But a look at the daily MACD shows that it remains extremely overbought at current levels.

It could be that Friday’s pullback will be enough to encourage fresh buying. But it feels as if gold will struggle to make solid gains from here, until the MACD gets down to more reasonable levels. This could be helped by more of a sell-off, or a long period of sideways consolidation. Time will tell how things pan out.

Source: TN Trader

Silver exaggerated gold’s move on Friday. From high to low silver fell the best part of $4 (7%) with prices closing in on $50 per ounce, back to where it began the week. As with gold, as conditions improved around the US-China trade war, and as investors toned down their fears about bad loans and fraudulent behaviour across the US banking sector, the selling pressure eased up.

Prices now appear to be consolidating. But as with gold, the daily MACD is very stretched to the upside. This needs to unwind to give silver the best chance of rallying further to fresh record highs.

Source: TN Trader

While prices could rally from here, silver needs to pull back further, or continue to consolidate for several weeks, before it can rebuild a store of upside momentum.

Oil prices have come under further selling pressure as the new week gets underway.  As far as front-month WTI is concerned, the area around $55 per barrel has emerged as an important area of potential support. This area was tested in April and again in May this year, which looks as if a double bottom has formed which could act as a stabilising point in the near term.

Source: TN Trader

However, the broader sentiment around oil remains cautious. Fundamentals continue to paint a picture of ample supply and weaker global demand growth, which may limit any meaningful upside potential. Despite intermittent rebounds, the market has yet to show evidence of a sustained recovery. The restarting of the US-China trade war has caused even more uncertainty over future demand.

Natural gas, on the other hand, staged a more decisive move higher after weeks of subdued trading. Prices gapped higher this morning, adding over 5%. This took prices back up to recent highs, and resistance, and so eased some of the bearish pressure that has weighed on the market recently. Though traders remain cautious about whether this bounce can hold.

Cryptocurrencies opened the week on a stronger footing, buoyed by an improvement in overall market sentiment. Bitcoin and Ether both posted solid gains, reversing part of last week’s sell-off. The move reflected a typical “risk-on” reaction, with traders returning to higher-risk assets as equity markets stabilised and volatility eased.

Still, despite the rebound, crypto markets remain highly reactive to shifts in global sentiment. The current gains appear driven more by short-term positioning than by any change in fundamentals, underscoring how closely digital assets continue to track broader risk appetite.

The VIX edged down 2.5% but remain elevated, suggesting that investors are not entirely convinced the recent calm will last. The slight decline in volatility aligns with the uptick in global equity markets, yet the persistence of elevated levels highlights that uncertainty remains just beneath the surface.

The week begins with cautious optimism. Stock indices across both Europe and the US point higher, supported by a rebound in sentiment and steady risk appetite. In Asia, the Nikkei’s relentless rally continues, though some signs of overbought conditions are emerging after consecutive record highs.

Gold and silver remain volatile but resilient, oil continues to test crucial support, and crypto enjoys a short-term rally on improved sentiment. Still, uncertainty lingers, from Chinese trade headlines and the prolonged US government shutdown.

As key earnings and inflation data approach, markets are likely to stay sensitive, and headline driven. The tone is positive for now, but confidence remains delicate — one unexpected headline could easily shift the narrative once again.