European markets mixed

US stock indices closed higher across the board on Tuesday. Investors continued to ride a wave of optimism following President Trump's ceasefire announcement. The announcement marked a pivotal shift in market tone, with traders quickly rotating back into risk assets. The tech-heavy NASDAQ led the charge, matching its all-time high from February as technology names continued to power ahead.

Source: TN Trader

In early trade on Wednesday, the S&P 500 traded within 1% of its own record high. In contrast, the Dow is over 4% adrift from last year’s all-time high, while the mid-cap, domestically focused Russell 2000 is over 12% below its own record.

Asian Pacific stock indices ended in positive territory, taking their cue from Wall Street’s strong close. Sentiment was upbeat across the board, with Hong Kong’s Hang Seng and the Shanghai Composite once again leading the advance, ending with gains of 1.2% and 1.0% respectively.  

But it’s worth noting that China-US trade issues remain unresolved. Chinese Premier Li Qiang struck a cautionary tone, urging global leaders not to let trade disputes become overly politicised. The remark underlined the fact that while the Israel-Iran ceasefire gave the market a boost, other sources of tension remain active in the background.

The FX markets were relatively subdued overnight, with most major currency pairs little moved. The US Dollar Index has steadied near three-year lows. This week’s sell-off followed comments from FOMC members Chris Waller and Michelle Bowman, who separately suggested that they could be open to a rate cut at the Fed’s next monetary policy meeting in July. The Japanese yen gave back some ground, with the USD/JPY back above 145.00, indicating that investors are less risk-averse.

Source: TN Trader

Meanwhile, the euro and the British pound were pushing on resistance at 1.1600 and 1.3600, respectively, against the US dollar. With the broader market tone leaning ‘risk-on,’ the FX space continues to reflect some cautious optimism for now.

Source: TN Trader

Yesterday, gold briefly dipped below $3,300 level. But buyers stepped in quickly and pushed prices up off their lows. Gold managed a modest rebound overnight, although gains were far from spectacular. The metal remains highly sensitive to shifts in risk sentiment, and while geopolitical risks have eased for now, safe-haven demand hasn’t fully disappeared.

Source: TN Trader

Silver has continued to consolidate following a strong start to the month. However, it was unable to hold above $36 per ounce this morning, and the consolidation has a slightly negative tinge. This has helped the daily MACD pull back from recent ‘seriously’ overbought levels to just overbought.

Source: TN Trader

Oil prices steadied overnight, with front-month WTI trading either side of $65 per barrel. This followed its dramatic pullback, which began ahead of President Trump’s ceasefire announcement. Oil sold off from its Sunday peak, which saw WTI hit a five-month high after the US airstrikes on Iran’s nuclear facilities.

Source: TN Trader

Investors saw Iran’s retaliation as weak, while dialling back on fears that Iran would close off the Strait of Hormuz. Investors are now hoping for an update on the success, or otherwise, of the US bombing. This follows a leaked report that Iran’s nuclear facilities suffered relatively little damage, and that the country’s nuclear programme could be back on track within months.

Natural gas was flat overnight, with the August contract holding within its recent range. The market appears to be pausing for breath after several choppy sessions. Momentum has stalled for now, and early trade was directionless.

Cryptocurrency markets were relatively quiet overnight, holding on to recent gains following Tuesday’s rally. Bitcoin was back in its consolidation range in early trade on Wednesday and holding above $105,000. Ether managed to crawl back over $2,400, a level which had held as support since early May.

The crypto market remains elevated but range-bound, with sentiment largely driven by macro developments for now.

The VIX edged lower. The July contract dropped from a high above 22.0 on Monday to just north of 19.0 in early trade on Wednesday, representing a 13% pullback.

Despite the market rally, key geopolitical risks remain unresolved. Reports suggest the US airstrikes failed to significantly damage Iran’s nuclear infrastructure, although President Trump publicly disagrees.

Meanwhile, the ongoing clash between Fed Chair Powell and President Trump continues. The Fed Chair sticks to his inflation mandate, while Mr Trump insists that interest rates should be cut significantly.

Tariff-related headlines also continue to trickle in. US ports are reportedly seeing a surge in Chinese freighter traffic ahead of the August 12th tariff deadline with China. This is a sign that companies are preparing for further trade disruptions. In the corporate space, FedEx fell 5% after issuing weak forward guidance, while attention now turns to Micron, which reports earnings after tonight’s US close.

Two major US stock indices continue to flirt with record highs as optimism surrounding the ceasefire feeds into risk assets. The NASDAQ broke new ground again, and the S&P 500 is barely a percentage point away from its own record.

At the same time, the dollar remains under pressure while gold and oil attempt to stabilise. Crypto has bounced back, and volatility is ticking lower - all signs of a market that is leaning bullish but mindful of risk.

The ceasefire has given bulls breathing room. But as ever, geopolitical and macro crosscurrents remain in play.