Asian Pacific indices mixed again

US stock index futures edged lower in early trade on Tuesday. This followed a strong rebound in the previous session and came as oil prices pushed higher overnight. Monday brought gains for all the majors.

Tech stocks led the recovery, but all 11 sectors within the S&P 500 ended in positive territory. The NASDAQ added 1.2%, closely followed by the S&P, which was up 1.0%. The Dow and Russell 2000 gained 0.8% and 0.9%, respectively.

Source: TN Trader

Investors were encouraged to increase their exposure to equities following a pullback in oil prices on Sunday night. Then Nvidia kicked off its annual four-day GTC developer conference with a strong projection for sales of its Blackwell and Vera Rubin chips.

But there’s one overarching event which is weighing on sentiment, and which is proving difficult to handicap. The US/Israeli war on Iran has entered its third week.

The Trump administration continues to insist that the US is overwhelming its opponent. And yet the Strait of Hormuz remains blocked to traffic, thereby cutting off around a fifth of the world’s supply of oil and liquified natural gas (LNG).

President Trump, who just over a week ago rebuffed UK Prime Minister Starmer’s offer of a battleship or something, saying the war was already over, is now demanding that it’s up to those who benefit from the oil and LNG which passes through the Strait to come and defend it. This call has been rebuffed by all the US’s allies, the argument being that no one asked for this war, and as the US started it, they should finish it.

Overall, it’s a political quagmire which, given the state of leadership across Europe as well as the US, looks likely to escalate further into a general ballyhoo of name-calling and insults.

As far as financial markets are concerned, perhaps it can best be summed up thus: ‘Risk-off’ sentiment will prevail for as long as the Strait of Hormuz is blocked. Yet sources in or close to the Trump administration say that this war was planned to last four to six weeks. That suggests an end by mid-April at the latest.

If it goes on beyond that, or even if there are no definitive signs that it is close to ‘mission accomplished’ by the end of this month, then the pressure on risk assets will be to the downside. But as soon as the Strait of Hormuz is open, then investors should prepare for a strong bounce-back in risk.

Today, investors will be keeping an eye on earnings from Lululemon, DocuSign and Oklo. Tomorrow brings the latest update on wholesale inflation, followed by the Federal Reserve’s policy decision.

No one is forecasting any change in rates. But traders will be looking out for any significant update on the FOMC’s quarterly Summary of Economic Projections, particularly the Fed Funds ‘Dot Plot’.

European stock indices were mostly firmer in early trade on Tuesday, despite some weakness across US stock index futures. Yet there was undoubtedly a cautious tone across equity markets as investors weighed geopolitical risks and shifting monetary policy expectations.

Still, European markets have shown some resilience despite ongoing volatility in global energy markets. As far as the UK’s FTSE 100 was concerned, the index continues to bet a boost from gains in oil majors such as Shell and BP due to the jump in oil prices as the US and Israel attacked Iran at the end of February.

Source: TN Trader

Earlier this morning, both the Eurozone and German ZEW Economic Sentiment surveys crashed unexpectedly into negative territory for the first time since April last year. That was when President Trump unleashed his reciprocal tariffs on ‘Liberation Day’.

Today’s survey results are a stark indication of investor pessimism, which could recover if the war were to end soon, on the condition that Iran is no longer a threat to global security.

Attention is also being paid to central bank decisions, with the Federal Reserve beginning its two-day policy meeting and set to announce its decision tomorrow. The Fed has faced political pressure from Donald Trump to cut interest rates, but rising inflation concerns linked to the Middle East conflict have shifted expectations toward a pause.

The Bank of England and European Central Bank will announce their respective decisions on Thursday.

There was relatively little movement across FX this morning. Investors appear to be sitting on their hands ahead of central bank meetings from the US Federal Reserve, the Bank of Japan, the Bank of England and the European Central Bank over the next two days.

Source: TN Trader

Overnight, the Reserve Bank of Australia hiked rates by 25 basis points to 4.1% as expected. Members cited their concerns over mounting inflationary pressures, although the vote was tight. The cash Dollar Index has pulled back from the highs hit late on Friday when it topped 100.00 to trade at its best level since last May.

It appears to be finding support around 99.40, and where it goes next may depend to some extent on the perceived hawkishness, or otherwise, of the Fed’s FOMC when it releases its quarterly Summary of Economic Projections tomorrow evening. The dollar has received a boost over the last three weeks or so.

Several members of the Fed have dialled back their expectations for future rate cuts, citing an uptick in inflation even before the war triggered a rally in energy. This hawkishness comes even as the US labour market shows signs of deterioration.

Meanwhile, the ongoing disruption in the Strait of Hormuz, a key route for roughly 20% of global oil supply, continues to fuel concerns about sustained price pressures. As a result, markets widely expect the Fed to keep rates unchanged in the 3.50%–3.75% range, marking a second consecutive pause.

Gold prices retreated from intraday highs, having pushed up towards $5,050 during the Asian Pacific session. Over the past fortnight, gold has traded in a relatively narrow range, with resistance coming in around $5,200 while support has held above the key $5,000 level. But there are signs that support is beginning to weaken, with prices making regular forays below here.

There has been no indication that prices are about to break sharply lower, but it certainly remains a risk. The daily MACD isn’t particularly supportive of higher prices, as it currently slopes downwards, albeit shallowly. Gold has lost its ‘flight to safety’ appeal. And it looks unlikely to capitalise on any further chaos, as that role appears to have been snapped up by the US dollar.

Source: TN Trader

Meanwhile, expectations that interest rates will remain higher for longer have also capped upside potential to some extent. Traders are now awaiting the outcome of the Federal Reserve meeting, along with policy updates from other major central banks, for clearer direction.

Like gold, silver has no clear overall direction. Its daily MACD has drifted down below the neutral level, and prices continue to consolidate to some extent. Yesterday, silver dropped out of its recent range, breaking below $80 per ounce and falling within a few cents of $77 per ounce.

It quickly recovered and is now back above $80. But moves like that remind investors of silver’s ‘mercurial’ nature, where volatility can appear out of nowhere. It could be that silver remains under pressure as expectations for further monetary easing recede. This in turn reduces demand for non-yielding assets, although lower oil prices and softer Treasury yields have provided some support.

Source: TN Trader

Crude oil was little changed this morning as hostilities continue across the Middle East. Prices appear to be settling into a range now, following the intense volatility which followed the joint US/Israeli attack on Iran just over a fortnight ago.

Back then, front-month WTI spiked to $115.75 only to slump back to $76 the following day. Since then, prices have climbed again, and WTI has spent most of the last week trading between $90 and $100 per barrel.

Source: TN Trader

The daily MACD indicates a seriously overbought market. But it’s important not to over-interpret this, given that there’s a war going on. Recent pullbacks in the oil price were triggered by optimism when it was reported that several tankers successfully navigated the Strait of Hormuz. This raised hopes that the critical shipping route could remain operational.

However, ongoing attacks on energy infrastructure and continued geopolitical tensions have kept supply risks firmly in focus. Diplomatic efforts are also evolving. The United States has allowed Iran to continue shipping crude through the Strait, while reports suggest that back-channel negotiations and direct communication between the two countries are underway.

Meanwhile, nations including India are securing additional vessels to ensure energy supply continuity. Yet uncertainty dominates, while crude oil continues to act as the primary driver of global market sentiment.

Bitcoin came within a tick of $76,000 in early Asian Pacific trade before pulling back. It is now retesting support around $74,000. If this can hold, then it would suggest that the overnight drop was little more than a bout of profit-taking following the consolidation and move higher that has been developing over the last five weeks.

If it does break lower from here, then the bulls will be hoping it can hold above $70,000, while $80,000 is the next upside target. Ether’s rally got a bit ahead of itself yesterday, so again, a pullback looked overdue. As with Bitcoin, if this proves to be mild and shallow, then it will encourage buyers with an upside target of $2,500.

Market volatility remains elevated, with the CBOE Volatility Index for March trading just below the 24 level. While this is well down from the 30+ reading last week, it still reflects a heightened state of uncertainty across global markets.

Fluctuations in oil prices, shifting central bank expectations and ongoing geopolitical developments continue to drive rapid changes in sentiment. Traders remain highly responsive to headlines, particularly those related to the Strait of Hormuz and broader Middle East dynamics.

The near-term outlook remains highly dependent on central bank guidance and geopolitical developments. The Federal Reserve’s policy decision is expected to be the key catalyst, with markets anticipating no change in rates but closely watching forward guidance for clues on inflation and the timing of potential easing.

At the same time, geopolitical tensions continue to dominate the narrative. Ongoing conflict in the Middle East, uncertainty around global trade dynamics and political developments involving the United States are keeping risk sentiment fragile. Oil remains at the centre of the macro story, and any further disruption or resolution in supply routes could drive significant market moves.

With volatility elevated and multiple high-impact events unfolding, markets are likely to remain reactive in the days ahead. Traders will need to stay nimble as sentiment shifts quickly in response to both policy signals and geopolitical headlines.