Asian-Pacific stock indices end mixed

US stock index futures traded lower on Wednesday morning. Investors are prepared for a critical batch of corporate earnings that comes against a backdrop of escalating hostilities between the US and Iran.

Today's weakness comes after yesterday's strong session, which saw chip stocks tack on impressive gains. This helped lift the NASDAQ and S&P 500 by 1.3% and 0.9%, respectively. The Dow added 0.7% while small caps were also in demand, lifting the Russell 2000 by 1.5%.

Source: TN Trader

The iShares Semiconductor ETF (SOXX) surged 5.5% on Tuesday as chip stocks continued to recover following a two-day shakeout at the end of last week. But the SOXX gave back 2.3% this morning on the back of some profit-taking. This came in despite a 22% surge in Super Micro Computer after last night's close. The company designs and builds servers and data centres, and it announced that it expects its gross margins to nearly double, given its significant order backlog.

Attention now turns to hyperscaler Alphabet, along with fellow 'Mag 7' constituent Tesla. Both announce quarterly results after tonight’s closing bell. Alphabet’s report will be closely scrutinised for updates on its substantial artificial intelligence investments, while Tesla investors will be looking for progress on autonomous driving, robotics initiatives and vehicle delivery trends.

There may be an extra buzz around Tesla given last month's record-breaking IPO of Elon Musk's other business, SpaceX. SpaceX briefly dropped below $120 yesterday, well below its IPO price of $135. It was up a touch this morning while Tesla was unchanged. Alphabet was up 0.6% in early trade.

Of further note, the recently listed SK Hynix ADR was down over 5% this morning. Today's other significant earnings updates come from Philip Morris, GE Vernova, AT&T, Texas Instruments and Intel.

Meanwhile, crude oil prices surged again this morning. The US undertook its eleventh consecutive night of intensive strikes on Iranian military targets. These have been constant since President Trump announced the end of the ceasefire at a NATO summit. By all accounts, the US attacks have intensified and expanded following the deaths of three US service members on a military base in Jordan.

Earlier today, US Secretary of State Marco Rubio said that Iran was not serious about peace talks, and that Tehran was 'demanding the right' to control the Strait of Hormuz, something that can't be allowed to happen under international law. President Trump is scheduled to deliver a speech at the White House this evening.

European investors shrugged off early weakness across US stock index futures to trade higher across the board this morning. The UK's FTSE 100 was looking particularly perky, as investors reacted positively to some softer-than-expected inflation numbers.

Headline CPI came in at +2.6% year-on-year, comfortably below the prior month's reading of +2.8%, and a touch under the consensus forecast of +2.7%. The news helped to dial back rate hike expectations from the Bank of England. The FTSE 100 also got a boost from its oil majors, BP and Shell, with both giants up 2.1% on the back of the renewed surge in oil prices this morning.

Source: TN Trader

The early weakness across US stock index futures was tech-related. Investors took profits in chip stocks after this week's rebound, which follows a sharp selloff at the end of last week. As European indices have a relatively small exposure to tech, they tend to do well on any rotation out of tech when investors look around for attractive value plays.

The US dollar continues to show impressive resilience. Last week, it came under significant downside pressure following a clutch of softer-than-expected US inflation updates. This saw the cash Dollar Index drop back towards 100.00 to trade at its lowest level in close to a month.

Investors reduced their inflation expectations for the rest of this year and dialled down the likelihood of a rate hike at next week's FOMC meeting. Despite this, the market still assigns an 85% probability of at least one 25-basis point rate hike from the Fed before year-end.

The Dollar Index has bounced back since last week, coming within 10 cents of 101.00 late yesterday. There is no real sign of any let-up in the ever-escalating hostilities between the US and Iran, and this continues to boost the dollar’s safe-haven appeal. Reports of fresh strikes in northwestern Iran and threats by Yemen’s Houthis to close the Bab el-Mandeb shipping route have heightened concerns over global trade and energy supplies.

The British pound remained under pressure against the US dollar following the release of softer-than-expected UK inflation figures. Headline CPI slowed to 2.6% in June from 2.8% previously, beating expectations for a 2.7% reading. Core inflation held steady at 2.6%, while producer price data pointed to easing cost pressures across the economy. This should give the Bank of England's MPC some freedom and allow members to maintain a wait-and-see approach toward monetary policy, reducing immediate pressure for further rate increases.

Yesterday, the USD/JPY broke above 163.00 to hit a fresh forty-year high. This continued yen weakness triggered yet another threat from Finance Minister Satsuki Katayama, saying that Japan was ready to take 'decisive action' if needed. This game of chicken with the yen carry-traders has played out for a while now.

The intervention back in July 2024 was successful for a bit. But the last intervention in April this year ended in expensive failure, as it took little more than a month for the USD/JPY to return to pre-intervention levels.

Source: TN Trader

Gold surged above $4,100 in the early hours of this morning and went on to hit its highest level in over a fortnight. This current rebound began on Friday after gold dipped below $3,960 to trade at lows last seen in early November. This selloff then seemed to run out of puff, which meant it didn't take a lot of buyers to push prices up. Having said that, there has been consistent support every time gold has dropped below $4,000.

Interestingly, this week's rally has come even as the US dollar has strengthened. The two have been negatively correlated for quite some time now, and it will be interesting to see if this relationship holds or starts to break down once again. The big question is whether the bottom is now in for gold, or is this simply a corrective rally within a bigger move down?

While gold's recovery has been impressive, it needs to break out convincingly above $4,200 to get the bulls re-energised. Otherwise, the threat of future rate hikes from the Federal Reserve, along with a worsening situation across the Middle East, could, ironically, weigh on further rally attempts.

Source: TN Trader

Silver had a satisfying pop higher overnight, touching $60 per ounce for the first time in twelve trading sessions. Like gold, silver has rallied off lows hit on Friday when it traded at levels last seen back in November. And as with gold, silver has made this upside progress even as the US dollar has made significant gains.

Technically, silver needs to break above $60 in a convincing fashion and hold this level on any pullback. It will be a big test to see if it can do this, especially if the US dollar continues its advance.

Helping the bullish argument is the fact that silver's daily MACD has begun to curl up again, even as it remains in oversold territory. But there's still no guarantee that a bottom is in place and that the downside correction that began in early February has completely run its course.

Source: TN Trader

Crude oil prices extended their rally on Wednesday, reaching six-week highs as investors assessed growing threats to global energy supplies. Front-month (September) Brent came within a few cents of $95.50 mid-morning before pulling back. The latest gains came after US Secretary of State Marco Rubio said that Iran was not serious about peace talks, and that Tehran was 'demanding the right' to control the Strait of Hormuz, something that can't be allowed to happen under international law.

Source: TN Trader

There were also reports that two tankers carrying crude oil from Saudi Arabia turned around in the Red Sea to head back home. This came after Iranian-backed Houthis in Yemen said they would blockade Saudi shipping and were looking to take control of the Bab al-Mandeb Strait, a key route linking the Red Sea and the Gulf of Aden.

If so, this could block millions of barrels of Saudi Arabian oil exports, which, together with the ongoing blockade of shipping through the Strait of Hormuz, could create serious supply shortages.

Bitcoin pulled back from a near five-week high hit yesterday. It continues to trade around $66,000 and appears to be consolidating after a strong run since the beginning of this month. Bitcoin is being supported by renewed institutional demand. Like precious metals, it has made gains even as the US dollar resumed its rally on 'flight to safety' as US/Iranian hostilities escalate.

There was some positive noise concerning regulatory developments in Washington. Yesterday, US Treasury Secretary Scott Bessent said lawmakers were at the "1-yard line" on the Clarity Act and urged Congress to pass the long-awaited bill before leaving for the August recess. The news provided a boost across the crypto sector.

Market attention remains firmly focused on corporate earnings and geopolitical developments. The VIX volatility index remains relatively subdued despite rising oil prices and continued military escalation in the Middle East.

Investors will monitor US oil inventory data later today, while attention also remains on President Donald Trump’s proposed tariffs on pharmaceutical imports and comments from Treasury Secretary Scott Bessent regarding potential sanctions on China over AI-related concerns.

The earnings calendar takes centre stage, with Alphabet and Tesla reporting after the US close, followed by Intel later in the week. Their results could provide the clearest indication yet of whether the AI-driven rally that has powered global equity markets can continue through the second half of the year.

With oil prices climbing, technology valuations under scrutiny, and geopolitical risks remaining elevated, markets are likely to remain highly sensitive to both earnings surprises and developments in the Middle East.

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