Asian Pacific stock indices slip

US stock indices began the week on a strong note. All the majors gapped up on Monday with the Dow, S&P 500 and NASDAQ hitting all-time highs. This bullishness followed US Treasury Secretary Scott Bessent’s claim on Sunday that 100% tariffs on Chinese imports were effectively off the table.

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Mr Bessent’s weekend meetings with China's Vice Premier He Lifeng appear to have gone well, laying out the foundations for a trade deal ahead of Mr Trump’s meeting with President Xi Jinping on Thursday. Investors expect the two leaders to reach an agreement. But the more cautious approach is to hope for a partial deal, along with an extended and flexible timetable, which could allow the two sides to thrash out any sticking points.

US stock index futures were mixed this morning, with a slight upside bias. The small cap Russell 2000 was dragging its heels a bit, but otherwise, sentiment continues to feel positive. Investors have expressed optimism ahead of Thursday’s meeting between Trump and Xi. This is expected to improve US–China trade relations, which have been badly strained since Mr Trump’s tariff announcements from April this year.

In addition, investors expect the Federal Reserve to announce a rate cut of 25 basis points after the two-day FOMC meeting ends tomorrow. Looking ahead, the CME’s FedWatch Tool assigns a 95% probability to a further quarter point cut in December. Traders will be closely watching for any guidance from Fed Chair Jerome Powell over future rate cuts, especially given growing concerns about labour market weakness.

With the ongoing government shutdown limiting economic data releases, the Fed faces a more uncertain policy backdrop than usual. But perhaps the most important aspect of tomorrow’s announcement will be any further details that Fed Chair Jerome Powell provides on the ending of quantitative tightening (QT). He signalled that this was happening back in September. But he didn’t give much guidance concerning when it would start. The end of QT would mean additional monetary stimulus for markets.

Earnings season remains a major focus as investors look for confirmation that corporate profitability is holding up. Five of the “Magnificent Seven” tech heavyweights will report their results this week. Alphabet, Microsoft and Meta Platforms report after tomorrow’s close with Apple and Amazon on Thursday.

These corporate giants, along with NVIDIA, which reports later in November, are at the forefront of the push towards artificial general intelligence. Investors are hoping for some clarity over how their multi-billion-dollar investments may pay off. This comes in the wake of a series of deals inked by the largest (by estimated market capitalisation) privately-owned company at the forefront of artificial general intelligence.

OpenAI has announced a series of deals with NVIDIA, Oracle, AMD and Broadcom worth a total of $1.5 trillion. Ahead of its earnings report, Amazon announced its biggest ever round of layoffs. It is cutting 30,000 corporate sector jobs out of 350,000 to remove layers of management and flatten the reporting structure. 

Overall, Amazon employs around 1.54 million workers. An earlier report from the New York Times said that Amazon plans to replace over half a million roles with robotics systems in the years ahead.

European stock indices were little changed in early trade, but with a negative bias. The UK’s FTSE 100 managed to sneak into positive territory, helped by HSBC, which gained 3%. The bank reported stronger-than-expected third-quarter profits, although other UK-based banks were little moved.

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The German GfK Consumer Confidence survey came in below expectations. This is a survey of around 2,000 German consumers who are asked to rate the relative level of past and future economic conditions. Looking back at previous releases, the survey has historically been strongly positive and remained positive even through the Great Financial Crisis of 2008/9. But it went negative as the Covid crisis hit and, apart from a brief upward blip four years ago, it has remained negative ever since.

Forex markets were relatively featureless this morning. Investors appear content to sit on their hands ahead of this week’s clutch of central bank rate decisions. Investors await announcements from the US Federal Reserve, the Bank of Canada (BOC), the Bank of Japan (BOJ) and the European Central Bank (ECB). Yet the market expectations seem baked in, with the Fed and BOC expected to cut by 25 basis points, while the BOJ and ECB are forecast to leave their respective rates unchanged.

The BOJ’s Core CPI came in at +2.1% year-on-year, as expected, and just a touch above last month’s 2.0%. The yen rallied a touch overnight, although it has come under heavy selling pressure since the beginning of this month. The USD/JPY gapped up in early October after Sanae Takaichi surprised markets by winning the leadership of the ruling LPD party. She is now Prime Minister and is known to favour low interest rates and fiscal stimulus as methods of boosting economic growth.

The USD/JPY appears to have made a ‘double top’ and the yen has subsequently strengthened. But it is still a long way short of filling the upside gap made at the beginning of the month.

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The US dollar was a touch weaker this morning, but had picked up a touch from its overnight lows. The Dollar Index has traded within a range of 97.00 to 99.00 for all of this month. It has strengthened overall but has repeatedly failed to break and hold above the resistance at 99.00. Time will tell if it gets a boost from this week’s events.

Yesterday, gold broke back below $4,000 for the first time in close to three weeks. The selling continued this morning in a move which saw gold drop below $3,900 as European markets opened. It has recovered a touch since then, but still looks vulnerable to further selling.

It has been a feature of this correction so far that, except for a brief pause last Thursday, the selloff has been relentless. At no point has there been a significant bounce. But that shows just how overbought the gold market became, with its daily MACD up at extreme levels as it hit an all-time high of $4,380.

Gold is no longer overbought. But the daily MACD continues to point down, indicating that momentum is to the downside. Despite this, gold will find support at some stage, and it’s quite likely that there will be a sharp reversal when it does. But as things stand, it’s difficult to identify any significant support levels as the market shakes off the bullish froth.

Once again, the question is whether there is another record-breaking rally left in this market, or if gold has topped someway short of the $5,000 that so many analysts were looking for.

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Yet again, it’s a similar story for silver. Just under a fortnight ago, silver hit an all-time high of $56.40. Since then, it has experienced a relentless selloff, dropping to a monthly low of $45.55 at the European open this morning. That represented a high-to-low slump of 19%, so not far short of hitting ‘bear market territory’, defined as a 20% fall from recent highs.

As with gold, silver’s daily MACD has pulled back from severely overbought levels. It too is pointing south, indicating that momentum is still to the downside. But the MACD is rapidly approaching ‘neutral’ levels, and the selloff is looking very overstretched.

Again, it’s difficult to identify significant support levels, but traders should be prepared for a sharp reversal once the selling exhausts itself. Silver took a long time to catch up with gold in terms of making new highs. And it could be that there are still a few rounds to go before the silver rally is finally over.

Source: TN Trader

Last week, crude oil put in a sharp rally, which took front-month WTI up from $56 per barrel to $62.50 on Friday. This represented an overall gain of close to 12%. The rally began with some mild short covering as traders took profits following an extended selloff. But the move accelerated after the Trump administration announced sanctions on Rosneft and Lukoil, Russia’s two biggest oil producers.

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The US executive was also trying to persuade India and China to cut back on their purchases of Russian energy. The move took traders off-guard and led to a wave of heavy short covering as significant price levels were breached on the way up. Prices have moderated a touch since last Friday.

Some analysts are questioning just how effective these new sanctions will be, given previous rounds. Although it’s worth noting that Lukoil has announced that it would be selling its international assets. 

Aside from this, OPEC+ is expected to announce another increase in production, further reducing the output reduction now running for several years. It surprised traders at the beginning of this month by announcing a smaller increase than expected. Could that happen again, or will OPEC+ surprise to the upside this time?

Saudi Arabia confirmed it will diversify further away from oil dependency by investing heavily in artificial intelligence, tourism, and sports. The UK, meanwhile, signed a landmark £8 billion trade deal with Turkey that includes the sale of 20 Typhoon fighter jets, a move seen as strengthening NATO’s defensive posture.

In corporate news, HSBC upgraded its profit forecast despite being entangled in a $1.1 billion legal dispute tied to Bernie Madoff’s Ponzi scheme. The bank’s shares rallied 3% following the announcement.

Markets enter Tuesday with a sense of optimism tempered by caution. The Federal Reserve’s two-day meeting begins today, with a 25-basis-point rate cut widely expected. Traders will also keep a close eye on the Trump–Xi summit on Thursday and a heavy slate of Big Tech earnings this week as well. Markets remain relatively calm despite the packed agenda ahead.

For now, investors appear confident that monetary easing, strong corporate results and improving global relations could help sustain the market’s upward momentum through the week.