Nikkei soars

US stock indices had a mixed session on Friday. The Dow tacked on 0.5%, while the small cap Russell 2000 added 0.7%. The S&P 500 was flat, and the NASDAQ lost 0.3%. Yet all the majors had a positive week. The Russell outperformed, gaining 1.7%, followed by the NASDAQ, which was up 1.3%. The Dow and S&P both rallied 1.1%.

Source: TN Trader

US equities continue to be in demand. Despite concerns that there has been no significant correction in any of the major indices since April’s tariff-induced sell-off, investors continue to add to their exposure.

This comes despite the US government shutdown, which began last Wednesday. This shows no sign of getting resolved anytime soon and has already led to the postponement of key government-produced economic data, including weekly Unemployment Claims, and September’s Non-Farm Payrolls, the latter of which was due on Friday.

On top of this, last week, US Treasury Secretary Scott Bessent warned that a long shutdown could dent economic growth. President Trump has warned that staff currently furloughed could lose their jobs permanently.

The longer the shutdown persists, the bigger the buildup of postponed data releases, which will cloud the state of the US economy further. This is bad for investors, as well as the Federal Reserve.

The US central bank is expected to cut rates by 50 basis points before year-end. But this could be hard to justify given the missing data releases, particularly those focused on the labour market. Despite the lack of catalysts, sentiment remained upbeat, and traders view the shutdown as a temporary obstacle rather than a major risk event.

US stock index futures were sharply higher in early trade this morning. Yet at the time of writing, all were trading below their respective all-time intra-day highs, which were hit on Friday.

While it remains unclear if any economic data may be released this week, there are plenty of Federal Reserve speakers to consider. These include Fed Chair Jerome Powell on Thursday, with Michelle Bowman, Neel Kashkari and Raphael Bostic amongst the other headliners. And not forgetting the new boy, and President Trump’s pick as governor, Stephen Miran. Mr Miran went against the grain and voted for a thumping 50 basis point cut at the last FOMC meeting in September. The minutes of that meeting are released on Wednesday evening.

The third quarter earnings season kicks off in earnest next week, with big banks such as JPMorgan, Wells Fargo, Goldman Sachs and Citigroup reporting on Tuesday. But this Thursday, there are early updates from Delta Air Lines, PepsiCo and Levi Strauss.

European stock indices ignored the strength across US stock index futures. The early weakness came as the French CAC dropped around 2%, dragging down other indices with it. The sell-off followed the news that French Prime Minister Sébastien Lecornu had resigned after less than a month in the job. He had faced extensive criticism from his own colleagues and opposition parties alike.

Source: TN Trader

Before he went, he unveiled his new cabinet. There’s been a desperate attempt to reach enough consensus for the government to deliver a realistic budget. But given the divisiveness and outright hatred, which is currently driving French politics, consensus seems like a complete pipe dream as things stand.

Despite this, all the European majors had rallied off their lows as midday approached. European Central Bank President Christine Lagarde speaks later this evening. But given all her announcements so far, no one is expecting any fireworks.

In the Forex market, the Japanese yen fell sharply overnight, following the election of Sanae Takaichi as the new leader of the ruling Liberal Democratic Party (LDP). Her victory here means that she is set to become Japan’s first female prime minister. The USD/JPY gapped higher from Friday’s close, gaining around 2% at one stage, and breaking above 150.00 for the first time since the beginning of August.

Source: TN Trader

Ms Takaichi is strongly conservative, and markets now expect the Bank of Japan (BOJ) to hold back from tightening monetary policy until next year. That should give its current dovish policy a little longer to help boost Japan’s flagging economy. Despite the fall in the yen, the USDJPY is still a long way below the highs from last summer, just before the yen carry-trade unwound so spectacularly.

The US dollar also got a lift from weakness in the euro. The single currency came under heavy selling pressure following the unexpected resignation of France’s new Prime Minister. His resignation after less than a month helps to highlight the political tensions building across the eurozone – not just in France, but in Germany too.

The Dollar Index pushed back above 98.00, raising hopes amongst dollar bulls that the bottom may be in for the greenback. The US dollar has had a torrid year so far. The Dollar Index began the year near 110.00. Three weeks ago, it fell to a multi-year low under 96.00, representing an overall loss of around 15%.

It had come under downside pressure due to expectations of lower US interest rates as Europe and the UK go on hold, and as Japan had a more hawkish bias. It’s also no secret that the Trump administration is pushing for a weaker dollar, as this should help boost sales for US exporters.

Gold surged to new highs this morning, breaking above $3,900 per ounce on the Asian Pacific open. It stalled out just below $3,950, although the bulls now have the $4,000 target within sight.

Source: TN Trader

On Friday, silver put in another strong rally, advancing over 2% to trade at levels last seen in April 2011 after it hit its own all-time high just below $50 per ounce. It has built on those gains this morning, and it’s worth noting that both precious metals have made these advances despite the strength of the US dollar.

Source: TN Trader

Both precious metals are well into overbought territory as measured by their respective daily MACDs. Yet so far, investors have only added to their long-side exposure, with very little evidence of any profit-taking going on.

It would appear that the ‘Fear of Missing Out’ is driving this trade to a large degree. It’s certainly trumping potential ‘sell’ signals like the stronger dollar. As stated previously, markets can stay overbought or oversold for much longer than most reasonable observers would expect. But traders should take care at current levels.

Buyers should be wary of potential downside risks. But those looking to profit from a sharp sell-off should also take care. After all, these rallies have been relentless, and who can know when a reversal may come.

Oil shot up close to 2% in early trade this morning, reversing a large slice of the losses from the end of last week. The bounce off the four-month low hit on Friday came after yesterday’s announcement from OPEC+ of a lower-than-expected output increase. The limited supply adjustment was seen as a supportive move that would help offset a glut in the oil market while still signalling confidence in global demand levels.

Last week, front-month WTI broke below resistance around $61.50 and fell further towards $60 per barrel. Crude had come under heavy selling pressure as traders prepared for supply increases from OPEC+, the restart after two and a half years of an Iraqi/Kurdish pipeline through Turkey, and on build-up of US crude inventories.

It was also understood that China was stockpiling crude imports rather than using them, suggesting that demand growth was slack and supplies plentiful. The news from OPEC+ should take some immediate pressure off the oil price. But so far, WTI has been unable to break back significantly above resistance (previously support) around $61.50. Until it does, then a retest of $60 per barrel can’t be ruled out.

Source: TN Trader

Gas prices climbed another 3%, extending a strong multi-day rally and reinforcing the view that momentum in the market remains firmly bullish. The move higher brings the commodity closer to the key 350 btu mark - a level that traders see as both a technical target and a potential resistance area.

The continued gains follow a solid rebound from earlier weakness, showing renewed conviction among buyers as sentiment improves across the broader energy landscape. Even with limited fundamental updates due to the ongoing US data blackout, traders appear comfortable maintaining long positions, supported by technical strength and steady upward pressure. The market tone remains constructive, with any dips so far being quickly bought back.

Yesterday, Bitcoin touched a new record high above $125,000. Bitcoin has surged higher ever since it briefly broke below $110,000 just over a week ago. The current rally means that Bitcoin has added around 13% since 28th September. Its daily MACD has turned sharply higher, and while this indicates a rise in upside momentum, it may be that Bitcoin will need to consolidate before it has a chance to push much higher.

Other major cryptocurrencies also climbed, benefiting from the same wave of optimism that has lifted equities and commodities in recent sessions.

Ether has also been pushing higher. But it remains below the August high of $49.50, although its own daily MACD is far from being overbought. Despite the rally’s intensity, the tone across the crypto space remained orderly, suggesting confidence rather than speculative frenzy. With Bitcoin now setting new benchmarks, attention turns to whether the momentum can hold through the week.

Volatility eased a touch as equity markets continued to trend higher. The muted reading reflected a lack of concern among investors despite the ongoing US government shutdown and the absence of key economic data. Instead, traders appear content to maintain bullish positioning as record highs dominate sentiment.

The continued downtrend in volatility signals that the market’s appetite for risk remains intact. For those positioned for short volatility, the current levels provide limited reward potential, but for equity bulls, the calm backdrop adds further tailwind.

The bulls remain firmly in the driving seat. US equities pushed to fresh record highs, and futures were pointing to more upside to start the week. The strong AI-driven bid, plus the Nikkei’s surge after Japan’s leadership change, has helped boost risk appetite, with momentum broad enough that markets are largely shrugging off the US government shutdown for now.

That said, headline risks are front and centre. The shutdown has created an economic data blackout (the September payrolls print was delayed), and Treasury Secretary Scott Bessent warned it could “hit GDP, hit growth and hit working America.” With fewer hard data releases coming through, traders will be paying close attention to public comments from Fed officials this week for guidance on the policy path in the absence of the usual data flow.

Across asset classes, the picture is clear but stretched. Precious metals remain bid, gold and silver continue their relentless climb, while crypto is posting fresh records on renewed risk appetite. Energy is bifurcated: oil is under pressure around the low-$60s, but gas is extending its run higher. Volatility measures remain subdued, signalling limited fear even as valuation and political risks linger.