Asian-Pacific stock indices sell off

US stock index futures were mixed in early trade this morning. The Dow and Russell 2000 edged into positive territory, while both the S&P 500 and NASDAQ were modestly lower, pulling back from their respective all-time closing highs posted last night. A look at this morning’s moves in individual stocks indicated some profit-taking across semiconductors, which seems reasonable given their incredible run since the end of March.

Source: TN Trader

Micron Technology, TSMC, AMD and Intel were all down between 2.5% and 3.5% this morning, while NVIDIA dropped 1.4%. There’s a significant uptick in the first quarter earnings season, with around 180 S&P 500 constituents set to report this week.

Today’s majors include Visa, Coca-Cola, Hilton, General Motors and Starbucks, while four members of the Magnificent Seven (Alphabet, Amazon, Microsoft and Meta Platforms) report after the close tomorrow, with Apple on Thursday. Analysts will be paying very close attention to forward guidance, particularly where AI-related spending is concerned.

The ceasefire between the US and Iran, as well as the one between Israel and Lebanon, appears to be holding. Tehran has put forward a proposal to reopen the Strait of Hormuz. Iran is insisting that the US lift its blockade on Iranian ports in the region and end the conflict. But it sounds as if President Trump is unhappy with the proposal as it fails to address Tehran’s nuclear programme.

Tomorrow evening, attention turns to the Federal Reserve’s monetary policy decision. The expectation is that the Fed will leave rates unchanged. But of far more importance is getting an insight into the Fed’s view of inflation coming on the back of elevated oil prices.

As things stand, the market is assigning a 74% probability of no change to the Fed Funds rate at all this year. In addition, this will be Jerome Powell’s final meeting as Chair. Although it is unclear if he will continue as a member of the Fed. If he does stay, this would wind up as President Trump something rotten.

European and UK stock indices were firmer across the board this morning. Investors shrugged off weakness across US stock index futures, which was largely down to a selloff in semiconductor stocks. They were also quite bullish despite another jump in crude oil, which hit a two-week high in early trade.

Source: TN Trader

Of course, higher oil prices can be quite welcome to some companies. That proved to be the case for BP, which jumped 3% after beating earnings estimates and announcing that profits had more than doubled. Shell, which reports next week, was up 1.5% on the news, while US oil giants Exxon Mobil and Chevron were also firmer. They both report this Friday.

Despite some early strength across the major indices this morning, European markets do look a touch fragile. The US/Iran war continues to drag on despite the fragile ceasefire, and the Strait of Hormuz remains closed. This is a major concern which weighs on sentiment and is a significant hurdle to boosting investor risk appetite.

The US dollar has staged a remarkable comeback since yesterday afternoon. The cash Dollar Index dropped below 98.00 around lunchtime on Monday. But from there it steadily pushed higher, in a move that has continued this morning, taking it back up towards 98.50.

The US dollar is showing resilience, and it continues to attract buyers on dips. This is quite intriguing, as it suggests that there’s plenty of ‘safe haven’ demand being expressed in this move, but which isn’t particularly obvious elsewhere.

The US/Iran ceasefire is holding, and Iran has proposed reopening the Strait of Hormuz in exchange for the US ending hostilities and lifting its blockade of Iranian ports in the region. But Washington appears reluctant to accept any deal that excludes nuclear discussions.

Meanwhile, the Federal Reserve will conclude its two-day FOMC meeting tomorrow evening. It is expected to keep interest rates unchanged at 3.50%–3.75%, marking a third consecutive hold. In fact, the CME’s FedWatch Tool now puts the probability of no change in rates for the rest of this year at 74%, up from 61% yesterday.

The USD/JPY dipped briefly after the Bank of Japan’s (BOJ) decision to keep rates unchanged at 0.75%. But the 6-3 vote split and higher inflation forecasts signalled a potential rate hike in the coming months. The USD/JPY continues to trade within a range that has been building for six weeks now, between 158.00 - 160.00. Traders remain alive to the possibility of intervention to support the yen should the rate significantly breach 160.00.

Source: TN Trader

Gold was unable to hold above $4,700 overnight and went on to drop sharply. Earlier this morning, it hit a near two-week low when it fell towards $4,600 before recovering a touch. The problem is the US dollar, which, as mentioned above, is showing remarkable resilience.

Gold and the US dollar don’t always correlate, but they certainly are now. And yet the dollar’s strength has been put down to ‘safe haven’ buying as investors seek out a market with the greatest depth and liquidity. Unfortunately, gold just won’t cut it as a ‘safe haven’ this time round. No doubt many investors will have been put off by all the volatility seen in gold earlier this year.

Looking at the chart, the daily MACD is curving down off the neutral level, suggesting a lack of upside momentum. It’s possible that buyers come back in now and manage to create a bounce off $4,600. But should gold break below here on a protracted move, then the next serious level of support only comes in at $4,400.

Source: TN Trader

Silver was down around 3% in early trade in Europe, although it had recovered a touch as the afternoon approached. Like gold, silver has lost any ‘safe haven’ allure it may have once had and now looks to be negatively correlated to the US dollar. The dollar rallied sharply yesterday, and that has continued this morning.

Source: TN Trader

It will be interesting to see how it behaves this week as there are central bank rate decisions from the US Federal Reserve, Bank of England and European Central Bank.

All are expected to keep their key interest rates unchanged, as did the Bank of Japan (BOJ) overnight. But the BOJ expressed its concerns about an increase in inflation, and it looks as if they are open to hiking rates at their next meeting in June. It could be that we hear similar messages from the US, UK and Europe.

Crude oil prices were firmer this morning with both Brent and WTI building on gains made yesterday. Front-month Brent hit a three-week high overnight to trade above $111 per barrel. The futures curve still shows a backwardation with prices forecast to fall later in the summer and into year-end.

Iran has a proposal which would see the Strait of Hormuz reopened, should the US agree to end hostilities and remove its blockade of Iranian ports. But it is understood that the Trump administration isn’t keen, as there is no mention of Iran’s nuclear programme. Oil prices have risen steadily over the past eleven days, and the daily MACDs for both Brent and WTI suggest that upside momentum has picked up.

Source: TN Trader

Bitcoin gave back some of its recent gains yesterday, having hit its best level since the end of January early in the session. Monday’s high briefly took Bitcoin over $79,400, marking a 22% gain over the past month. But it then pulled back sharply, breaking below $76,500 before staging a late bounce.

Bitcoin was a touch weaker again this morning. It has shown remarkable resilience since hitting multi-month lows around $60,000 in early February, and there’s been a noticeable improvement in sentiment towards it. But it appears to have lost some upside momentum as it pushes towards $80,000.

Could this prove to be a significant level of resistance, suggesting that a top is in for now? Or is Bitcoin merely consolidating and building momentum for another push higher?

Volatility remains contained as investors adopt a wait-and-see approach. The main data point on Tuesday is US Consumer Confidence, while earnings from Coca-Cola, UPS and General Motors remain in focus.

President Trump’s meeting with his national security team and Iran’s proposal concerning reopening the Strait of Hormuz highlight the fluid geopolitical backdrop, leaving US markets in a holding pattern. Attention is turning towards tomorrow’s Federal Reserve announcement, which will mark Jerome Powell’s final appearance as Chair.

Overall, conditions point to the likelihood of a relatively quiet session, though underlying risks suggest the potential for sudden volatility as geopolitical and central bank developments unfold.