Asian-Pacific indices close mixed

US stock index futures were little changed in early trade this morning. But a modest drop in the tech-heavy NASDAQ indicated some caution amongst investors as they await NVIDIA's quarterly earnings report after tonight's close, and an important inflation update at 13:30 BST. All the US majors ended higher last night.

Both the Dow and S&P 500 tacked on 0.3% each, the NASDAQ added 0.7% while the small cap Russell 2000 finished up 0.5%. NVIDIA was a tad firmer in early trade this morning, having added over 2% yesterday. Despite this, the stock is currently down over 6% from the recent high hit last Monday.

Source: TN Trader

NVIDIA's results may provide another significant test for the stock market in general, and AI-adjacent stocks in particular. NVIDIA is the chip designer at the vanguard of AI, and the AI infrastructure build-out which is contributing so much to US economic growth. It is also a key signifier for other semiconductor players such as Micron Technology, Arm, Advanced Micro Devices and Marvell Technologies (which reports tomorrow).

The question is: what should investors focus on when results are released? Analysts expect second-quarter revenue to come in between $92-96 billion which would represent around a 67% increase from a year ago. Earnings per share (non-GAAP) is forecast between $2,.10-2.18. But data centre revenue is the biggest component by far, and this needs to accelerate to please the bulls.

Margins also need to keep growing, although at 75% last quarter that won't be easy. But ultimately, forward guidance will be key, as NVIDIA has delivered an upside surprise for seven consecutive quarters now. Investors would certainly reward the chip designer on any signal that demand is broadening out beyond the usual hyperscaler names. So, no pressure.

Before that, Core PCE (the Fed's preferred inflation measure, although not Chair Kevin Warsh's favourite) is expected to come in at +3.3% year-on-year, unchanged from the last update. Any significant deviation from this number could seriously affect interest rate expectations from the Fed ahead of its FOMC monetary policy meeting which concludes on the 16th of September. Bear in mind, this is still far above the Fed's 2% inflation target, so beware the screech of hawks.

European stock indices were modestly higher this morning and trading near one-week highs. Sentiment has been lifted by the selloff in crude oil, although it feels as if investors are cautious, and wary of getting too far out of their depth ahead of today's key events. There's the latest update on US inflation early afternoon followed by NVIDIA's earnings update after tonight's close. Regarding the latter, crucial as far as investors are concerned will be forward guidance for the next quarter.

Meanwhile, oil prices have fallen again this morning, and front-month Brent (October) has now dropped over 8% since Friday's close. The selloff was triggered by reports that the US and Iran were close to an interim ceasefire that includes guarantees for unhindered commercial navigation through the Strait of Hormuz.

Sentiment was further bolstered by official confirmation from Iran and Oman that they had resumed bilateral talks aimed at fully reopening the waterway. Last week President Trump promised to 'bomb the s**t' out of Oman if it didn't 'get out of the way' regarding US interests. Oman is, of course, one of the US's key allies in the region.

The UK's FTSE 100 was a touch lower this morning. But it is now within striking distance of significant resistance at 11,000 having bounced off support at 10,700 last Thursday.

Source: TN Trader

Forex markets were quiet this morning, reflecting both the summer doldrums and calm ahead of a potential storm. As with other risk markets, FX traders were girding their loins ahead of a key US inflation update at 13:30 BST, and earnings from NVIDIA, the corporation at the vanguard of global AI development after tonight's US close (see above for comments).

The cash Dollar Index was little moved, but trading south of 99.00. On top of today's major economic events, traders must consider what the US Treasury may do next as it attempts to bring down yields on longer-dated government bonds.

This time last week, Treasury Secretary Scott Bessent said he was doubling Treasury purchases of longer-term bonds to at least $4 billion per operation. The idea is to try and cap yields on 10-year Treasury Notes (and beyond) given their importance in setting borrowing rates on such vital things as mortgages, car finance, business loans and student loans. Yet the Treasury needs to issue even more bonds to finance interest payments on federal debt which has now crossed above $40 trillion.

The trouble is that investors are also being tempted by large bond offerings from AI-adjacent corporations. So, there's that competition, and Mr Bessent has questioned by hyperscalers and the like want to tap the long end for AI infrastructure development, rather than, say, 5-year notes. Two senior Treasury officials said yesterday that the department could tap its near $1 trillion General Account to help fund the expanded bond purchases.

The USD/JPY traded around 159.00 as the Treasury's buyback plans continued to weigh on the dollar against the yen. Bank of Japan (BoJ) Governor Kazuo Ueda will skip this week's Jackson Hole gathering due to a scheduling conflict, with board member Naoki Tamura attending in his place. A recent Reuters poll of economists showed 57% now expect a BoJ hike in September, a sharp increase from July's survey.

Source: TN Trader

Gold suffered a steady stream of profit-taking overnight which has extended into this morning's session. In the early hours of yesterday, gold came within $4 of $4,700 to trade at its highest level since mid-May. This represented a gain of over 17% since the end of July and took the daily MACD up to levels last seen in early March when gold was trading around $5,400.

This means that gold is back in overbought territory, but not excessively overbought territory. Nevertheless, it has rallied a long way in a short space of time, so traders shouldn't be surprised to see a bit of a correction to the downside, or at least a period of consolidation.

Source: TN Trader

Could it be that today's Core PCE US inflation provides the catalyst, or could that come after Fed Chair Kevin Warsh's keynote speech at the Jackson Hole Economic Symposium on Friday? Anything is possible, including a chance that gold doesn't pull back to any meaningful degree, and just keeps going higher.

As we have seen since the highs hit at the end of January, gold currently has a strong inverse relationship with the US dollar. The pullback in the dollar since the end of last month has given gold the kick up the backside it needed to break out of a narrow trading range that had been building through July.

It's clear that US Treasury Secretary Scott Bessent, and his President, Donald Trump, want a weaker dollar to help US exporters. And Mr Bessent is doing all he can to bring that about, including intervention to strengthen the Japanese yen, and his recent attempt to push down longer-dated government bond yields. Could the US dollar be due a rally? Perhaps. The first big test will today's inflation numbers.

Silver's daily MACD has also risen steadily and is now looking a tad overbought. But unlike gold, silver has repeatedly run into resistance around $70 per ounce. This has helped to flatten the MACD as silver effectively consolidates. That's not to suggest for a minute that silver has limited downside, but it does point to a slightly different technical setup from gold's.

Despite this, the US dollar is likely to hold the key to silver's next big move, and the dollar's near-term direction looks likely to be driven by Federal Reserve rate hike expectations. This is why today's Core PCE release has the potential to be a major catalyst for the next big move in the dollar, and therefore silver.

Source: TN Trader

Crude oil prices fell again this morning, extending this week's selloff. Yesterday saw a significant pullback in crude following reports that suggested the US and Iran were close to agreeing a ceasefire deal. Further downside pressure came from confirmation that Iran and Oman had resumed talks focused on reopening the Strait of Hormuz.

Source: TN Trader

At the beginning of the week, there was some relief that the fresh round of US sanctions, designed to bring the Iranian economy to its knees, weren't as bad as many expected. In addition, the US shift away from military action to economic measures to bring about a solution to the crisis, was seen as taking the pressure off oil as there would be less likelihood of further supply disruption, or destruction.

Bitcoin pulled back from the thirteen-week high above $81,200 hit in the early hours of yesterday morning. That level represented a rally of just under 30% from the beginning of last week. The move took bitcoin into an area of significant resistance roughly between $80,000 and $82,000.

Given that this rally has, due to its speed and size, taken the daily MACD into overbought territory, then a bout of profit-taking, along with some outright shorting, is to be expected. The question now is, of course, just how deep any subsequent pullback may prove to be.

Traders must now position themselves ahead of today's key US inflation update as well as quarterly results from NVIDIA, the world's largest corporation by market capitalisation, due after tonight's US close. For many traders, the surge in bitcoin began as they pivoted away from the US dollar, in what has come to be known as the 'dollar debasement trade'. There is a feeling that the US dollar is extremely vulnerable given the size of US federal debt, along with the Trump administration's trade war with its trading partners.

Gold is also benefitting from this view, although it remains unlikely that the dollar will lose its reserve currency status as there is currently no alternative given the dollar's widespread acceptance, liquidity and backing of the world's largest economy.

There's plenty of US data on tap, with PCE inflation alongside durable goods, GDP and weekly oil inventories. NVIDIA snapped a seven-day losing streak yesterday ahead of tonight's earnings update. The options markets are now pricing a swing of around 5% either way on the print.

The ECB says inflation is likely to sit above its 2% target for an extended period, while analysts flag oil as vulnerable below $80 a barrel. Canada has unveiled retaliatory tariffs against the US, OpenAI has lost another executive, and SpaceX is reportedly planning a $100 billion spaceport in Louisiana.

Investors are watching for today's one-two: inflation before the bell and Nvidia after the close. These two events look set to be the drivers and lead indicator going forward, and until then it's shaping up as a wait-and-see day.

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