Asian-Pacific indices bounce

US stock index futures were firmer across the board on Tuesday. This followed what turned out to be a relatively modest rebound across equities yesterday following Friday’s slump.

The big tech NASDAQ and small cap Russell 2000 led yesterday’s advance, adding 0.9% and 0.8% respectively. But the S&P 500 could only manage a modest gain of 0.3% while the Dow closed down 0.2%. All the majors pulled back from intra-day highs hit yesterday afternoon. But this morning’s rally across futures markets has helped to lift them all off overnight lows.

Source: TN Trader

Friday’s selloff, led by tech with semiconductor stocks at the forefront, was a rare reminder that stocks can go down as well as up. The pullback followed a particularly strong set of US payroll numbers on Friday afternoon. The jobs data raised the probability of rate hikes from the Federal Reserve later this year.

The likelihood of two 25-basis point hikes, with the first before October, is now considered quite possible. But stocks were already coming under selling pressure following some disappointing forward guidance from Broadcom on Wednesday night.

Overall, the moves since then have helped all the daily MACDs across the US majors pull back from ‘overbought’ levels. But it will take time for them all to reset at more neutral areas, and anyway, the market may have other plans. As noted above, the current bounce-back is relatively mild, so it will be interesting to see if the S&P can now break and hold above 7,450.

The big question is, of course, have the major US stock indices topped out, or can the rally resume? So far, the ‘dip buyers’ have turned up once more. But it does put even more focus, if that were possible, on this Friday’s SpaceX IPO. And one of the reasons for that is the significant proportion of the stock for sale which is being made available to retail investors.

Is this true democratisation, the likes of which have never been seen on Wall Street before? Or is it a cynical attempt to unload an extraordinarily expensive and highly speculative venture on a gullible public? The truth is probably somewhere in between. And would-be investors will just have to decide how far up, or down, the altruistic scale they consider Elon Musk, the world’s most impressive entrepreneur, and richest person.

European stock indices were mostly firmer in early trade this morning, following in the footsteps of perky US stock index futures. European tech continued to recover with the Stoxx Tech 600 Index up around 0.8% mid-morning. European investors are looking ahead to Friday’s SpaceX IPO and wondering if the first day’s performance could be the catalyst for the next big market move, or simply a record-breaking event.

Source: TN Trader

Meanwhile, they were also considering the situation across the Middle East. There were a few tit-for-tat missile exchanges between Israel and Iran over the weekend, raising fears that the fragile US/Iran ceasefire, which has been in place since early April, may finally break.

But Iran announced it had halted military strikes against Israel, although it warned that it was prepared to resume hostilities and attacks if Israel continued to undertake military operations in Lebanon. Israeli Prime Minister Benjamin Netanyahu countered that the conflict was “not yet over.” President Trump insisted that negotiations were progressing and that the war could end within days, and that the Strait of Hormuz would soon be reopened. Hmmm.

The US dollar was weaker across the board today as investors cheered dialled-down tensions across the Middle East. This followed a difficult weekend where Israel and Iran traded missiles. But an uneasy truce was declared yesterday between Iran and Israel, which appears to depend on Israel staying out of Lebanon. This has meant that Tehran is prepared to re-engage in peace talks with the US.

Yesterday, President Trump said that negotiations were close to completion and that the Strait of Hormuz could reopen within days if a deal is reached. The cash Dollar Index pulled back sharply, having once again failed to break through resistance at 100.00. The Index soared on Friday afternoon following a strong set of US jobs numbers. These raised the prospect of Federal Reserve rate hikes, as the central bank battles inflation.

Labour market strength suggests that the US economy can absorb higher borrowing costs without too much pain. Despite the pullback in the Dollar Index, it remains buoyant and has managed to hold above the upper bound of recent support, which comes in around 99.50. FX players will be keeping a close eye on US inflation updates, with CPI tomorrow and PPI on Thursday.

Despite the pullback in the US dollar, the USD/JPY continues to trade above the key 160.00 level. Japanese officials reiterated their readiness to take decisive action against excessive currency volatility and speculation.

At the end of April, they waited until the USD/JPY breached 160.70 before intervening to support the yen. But to get the biggest bang for their buck, Japan’s authorities will probably try to surprise the markets. Could this mean they let the yen weaken further? Or are they prepared to sell into the dollar when it is already in retreat?

Source: TN Trader

Yesterday morning, gold dropped to a ten-week low, trading briefly below $4,269. It managed to recoup some of its losses as the day progressed, but was unable to break above resistance around $4,350. The rally came after the US dollar gave back a slug of Friday’s gains. This was helped along by reports that Iran and Israel had halted attacks against one another after an appeal from President Trump.

Source: TN Trader

Mr Trump went on to insist that negotiations between the US and Iran were progressing very quickly and were entering the home stretch. He suggested that the talks could be wrapped up soon, leading to the reopening of the Strait of Hormuz in a few days. If so, then it will be interesting to watch the US dollar, which has rallied on the back of the crisis. This has weighed on gold.

Could an end to the war see these positions reversed? Investors are now awaiting this week’s US CPI and PPI reports, which are expected to provide further insight into the Federal Reserve’s policy outlook.

Yesterday morning, silver also dropped to a ten-week low, coming within a few cents of $66 per ounce. It then rallied but ran into some resistance just under $69. As with gold, silver’s performance is currently negatively correlated with the US dollar. This isn’t always the case, and correlations have a habit of working until they don’t.

Source: TN Trader

But the current one has made life difficult for precious metals bulls, particularly those who see gold and silver as the ultimate havens in times of geopolitical stress. Yet silver and gold have been spurned, even as the situation in the Middle East remains apparently intractable. Instead, precious metals have been driven lower every time safe-haven buying has lifted the dollar.

Oil prices gapped higher when markets reopened on Sunday night after the weekend. Investors reacted to news that Israel and Iran had traded missiles with each other despite an intervention from President Trump. But the situation calmed down yesterday after Israel and Iran agreed to halt attacks against one another, easing some immediate concerns about further escalation across the Middle East.

Oil prices pulled back sharply yesterday morning before finding some support. But the selloff resumed overnight, taking front-month (August) Brent down to $92 per barrel, its lowest level since the end of May. President Trump has insisted that negotiations between the US and Iran were now in their final stages. He said that a positive outcome could emerge within days and that would lead to the immediate reopening of the Strait of Hormuz.

Source: TN Trader

Meanwhile, Israeli and Iranian officials confirmed that hostilities may have ceased for now, but that both sides reserved the right to respond to future aggression. So, significant risks remain, while the Strait of Hormuz remains effectively blocked.

Cryptocurrency markets showed signs of stabilising after one of the most difficult periods of the year. On Friday evening, Bitcoin broke below $60,000 to trade at its lowest level since October 2024, just ahead of the US Presidential Election, which was won by Donald Trump. Just one year later, it hit a fresh all-time high above $126,000, thanks to the Trump administration’s obvious friendliness towards all things crypto.

But it has lost over 50% of its value since then. Investors appear to have tired of cryptos, as regulation gets bogged down in disagreement. They are no longer the new shiny, exciting trading vehicle when it’s easier to make money buying AI-related tech. But who knows? It could come back into favour just as easily as it dropped out. But it must establish some solid support first.

Markets continue to focus on inflation data this week, with US CPI due on Wednesday and PPI on Thursday. Investors are also monitoring the European Central Bank meeting, Bank of Canada rate decision and UK GDP data.

Technology stocks remain at the centre of market attention after leading Tuesday’s rebound, while the upcoming SpaceX IPO continues to dominate investor discussions ahead of its debut on Friday.

In currency markets, traders continue to assess the implications of a weaker yen and speculation that the Bank of Japan could raise rates at its June 16 meeting.

Oil prices remain highly sensitive to developments in the Middle East, with concerns about shipping disruptions through the Strait of Hormuz continuing to influence sentiment.

As markets await inflation data and further geopolitical headlines, investors will be watching closely to determine whether last week’s sell-off created a buying opportunity or signalled the start of a more prolonged period of volatility.

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