Asia Pacific markets mixed

US stock index futures were firmer across the board in early trade this morning. The move was largely tech-led, and once again the S&P 500 nudged above 7,000 before pulling back. The gains followed on from a mixed close across Wall Street on Wednesday. Earlier in the session, the Federal Reserve concluded its two-day FOMC monetary policy meeting.

Source: TN Trader

Equities were largely unmoved after the Fed left rates unchanged, as expected. But if anything, the accompanying statement was a tad more hawkish than the one in December. It not only toned-down concerns over the labour market but upgraded its growth forecast to ‘solid’ from ‘moderate’.  

Despite this, there was no change to interest rate expectations for the rest of this year. The CME’s FedWatch Tool still forecasts two 25-basis point rate cuts, with the first anticipated in June.  All eyes and ears then turned to Fed Chair Jerome Powell’s subsequent press conference. But there was no fun for those hoping for fireworks.

Mr Powell chose to keep his own council when it came to questions over the Fed’s independence, political pressure from the Trump administration, the US dollar or what he will do after he steps down as Fed Chair in May. What has become apparent is that markets don’t expect another rate cut under Powell’s leadership.

But while equities exhibited indifference to the latest Fed meeting, Treasury markets were less sanguine. The yield on the 10-year ticked up to 4.27%. Bear in mind, it was below 4.00% two months ago.

Three ‘Mag 7’ constituents reported results after the close. These proved to be a mixed bag. Meta Platforms surged over 7% after issuing a stronger-than-expected first-quarter sales forecast.

Meanwhile, Tesla rallied over 2% after beating earnings expectations. This outweighed a 3% year-on-year decline in revenues, and news that full-year deliveries declined 9%. Of course, the prevailing narrative, particularly amongst ‘Tesla fanboys’, is that the company is all about robots, not EVs.

Elon Musk is happily leaving the latter to the Chinese. Meanwhile, Microsoft dropped over 6% after announcing record AI spending alongside softer cloud growth and weaker margin guidance. The news reinforced fears that a return on AI investment may be slow in coming.

Despite this, there were no signs of a more general selloff across other companies whose fortunes are closely tied to AI. Attention now turns to weekly jobless claims and a busy earnings calendar, which includes Apple, Lockheed Martin, Caterpillar, Honeywell and Mastercard.

Germany’s DAX was down over 1.0% soon after the open, bucking the firmer trend seen across other European stock indices. The selloff in the DAX was largely driven by an 8.6% slump in SAP. This was the biggest one-day fall in the stock in over five years, and it followed fourth-quarter results from the German software manufacturing giant.

Source: TN Trader

These showed that cloud revenues fell short of forecasts. While SAP’s news has, just like Microsoft’s, failed to translate into a widespread pullback across AI-related corporations, it should provide a warning to investors.

No doubt this isn’t one they want to hear, but there is now significant evidence that returns on AI investment may be slower and harder to come by than previously anticipated. For now, that warning is being ignored.

Following a burst of activity which saw the US dollar, as measured by the Dollar Index, slump to fresh four-year lows early yesterday, FX markets slipped back into a stupor this morning. Perhaps the recent market brouhaha has just proved too much for investors.

Not only has the US dollar fallen to its lowest levels since 2021 against both the euro and sterling, but there has also been a savage reversal in the fortunes of the Japanese yen. After a long period of weakness, the yen flew higher following speculation that the US was ready to help Japan’s authorities in supporting the yen.

Comments from US Treasury Secretary Scott Bessent denying any intervention triggered a sharp sell-off in the Japanese currency. The selloff in the yen began in early October. This was when Sanae Takaichi won the leadership of the ruling coalition LPD - an event which ultimately led to her becoming Japan’s first female Prime Minister. But for how much longer?

Source: TN Trader

Ms Takaichi has called a snap election for Sunday, 8th February, hoping to capitalise on her current popularity. If she can shore up her position, then expect more fiscal stimulus. This looks likely to weigh on the yen, given that there has been no indication as to how the stimulus will be paid for. In the meantime, the US dollar continues to hold near multi-year lows.

Late last night, gold pushed to a fresh record high of $5,598, narrowly missing the $5,600 milestone. Since then, it has pulled back modestly, and this has helped to take some of the heat out of the short-term momentum indicators. The rally has been fuelled by sustained dollar weakness, geopolitical tensions and strong demand for traditional stores of value.

Source: TN Trader

Profit-taking has so far failed to disrupt the broader uptrend, let alone even hint that traders are expressing much caution. Instead, investors continue to look to gold as protection amid concerns over trade frictions, central bank independence and escalating geopolitical risks.

Fundamentally, those are all solid and sensible reasons to hold gold. But whether they are compelling enough to add exposure at current levels is another matter entirely.

Silver remained the standout, climbing more than 65% this month and holding near $118 despite intraday volatility. Demand has been driven by safe-haven flows, tight supply, industrial usage in electronics and renewables, and momentum-driven buying as investors search for alternatives to gold. Copper also traded at record highs, reinforcing the strength across the precious metals complex.

Source: TN Trader

Crude oil was firmer again in early trade this morning, building on gains from earlier this week. This saw front-month WTI come within a few cents of $65 per barrel, to hit its highest level in four months. At this morning’s high, crude oil has added 6% since Friday’s close, and WTI is now butting up against an area of resistance which held throughout September.

Source: TN Trader

Yesterday brought the latest US inventory update from the Energy Information Administration. This showed a slightly bigger-than-expected drawdown in stockpiles, which helped support prices. But the main reason behind the latest leg of this rally has been rising geopolitical risk, particularly the escalation in tensions between the US and Iran.

President Trump warned Iran yesterday that it risked an attack from the US if it proved unwilling to make a deal on its nuclear program. This increased fears of supply disruptions, especially through the Strait of Hormuz, which have in turn underpinned the push higher in oil.

There’s been very little change since yesterday. Bitcoin continues to hover between $85,000 and $90,000 while Ether is marking time between $2,800 and $3,000. Both have shrugged off a bounce-back in both the NASDAQ and S&P 500 over the last ten days. This is something of a departure, as both indices have been lifted by tech, and this usually leads to gains for cryptos.

Instead, investors appear to be exercising some caution. This may be because the Dow and Russell 2000 have struggled to push back up towards record highs. And it could also be because of weakness in the US dollar.

Previously, Bitcoin has been viewed as a hedge against dollar debasement. But it has failed to match the upside momentum in both gold and silver. The steady-policy message from the Fed has calmed currency volatility but has also left crypto sidelined as investors prioritise assets with clearer momentum.

Natural gas prices bounced back overnight, continuing a pattern of sharp swings. Volatility remains elevated, with the market offering wide intraday ranges as traders react quickly to shifting macro and energy sentiment. Despite this, it’s fair to say that prices have been consolidating at elevated levels following the sharp rally which began a fortnight ago.

The VIX was up for the third consecutive session this morning, reflecting underlying caution despite equities sitting near record highs. While volatility has eased from recent peaks, it remains elevated enough to signal some investor unease around macro risks, earnings surprises, and upcoming economic data. As far as the VIX is concerned, these risks have picked up since the beginning of the year.

Markets remain heavily driven by earnings and macro data rather than headlines. The US Federal Reserve, along with the Bank of Canada, held rates steady, reinforcing a wait-and-see approach. Tesla’s post-earnings bounce contrasts with Microsoft’s sharp sell-off, highlighting growing dispersion beneath index-level strength.

US jobless claims are due later today. Metals continue to dominate the narrative; oil remains sensitive to geopolitical risk, and crypto struggles to regain relevance.