Tech stocks lift Asian-Pacific indices

There were gains for all the major US indices on Thursday, with a noted outperformance by tech and semiconductors in particular. The NASDAQ Comp added 1.3%, while the S&P 500 rose 0.8%. The Dow Jones Industrial Average tacked on a modest 0.3%, while the small cap stocks in the Russell 2000 were also in demand, pushing the index up 1.2%.

Source: TN Trader

Sentiment got a boost from a drop in oil prices after President Donald Trump claimed that Iran had made overtures to resume negotiations. Reports that Qatar and Pakistan are working hard to get peace negotiations restarted also helped improve investor sentiment. So, the US/Iran war trundles on, almost in the background, even as the Strait of Hormuz is far from being safe and fully open for business.

Yet while this means that tankers transporting crude oil and chemicals cannot pass through the Strait in the numbers that did prior to the war, there has been some improvement. In addition, overland pipelines have been used effectively to move at least some production out of the Gulf region.

US stock index futures were a touch weaker this morning as investors cashed in on some of yesterday’s gains in chip stocks. Investors are paying close attention to South Korea’s SK Hynix’s US debut on the NASDAQ later today. Its ADRs have been priced at $149, and reports earlier this week suggest the issue is seven times oversubscribed. This will be the second biggest offering in history after last month’s SpaceX IPO.

Meanwhile, Oracle had its credit rating downgraded by S&P to BBB-, just one notch above junk status. The ratings agency noted rising capital expenditure requirements, increasing competitive pressures and concerns over the company's large exposure to OpenAI. They noted that Oracle would be seriously exposed if OpenAI were unable to pay Oracle for any reason.

Oracle’s stock price has been on a rollercoaster ride over the last eighteen months. Having rallied 160% between April and September last year, it has had a torrid time. The stock price is pretty much back to levels from 15 months ago. Despite the downgrade, Oracle rallied 2.7% yesterday.

Attention turns to the second-quarter earnings season, which begins in earnest next week. Delta Air Lines is among the first major companies scheduled to report results. Investors continue to assess whether corporate earnings can justify elevated equity valuations, while forward guidance will once again drive prices.

European stock indices were subdued on Friday. Investors considered the optimism surrounding technology stocks, where Europe has little exposure when compared to the US and some Asian-Pacific countries, against concerns over escalating tensions in the Middle East, where Europe is exposed due to its reliance on imported energy, just like some Asian-Pacific countries, but unlike the US.

Source: TN Trader

Overall, sentiment remained fragile as the US and Iran resumed hostilities, hitting each other's military targets around the Gulf and the Strait of Hormuz. Despite a spike in crude oil prices over the past week, it does appear that investors are taking this latest breakdown between the US and Iran in their stride. Oil prices pulled back a touch yesterday and were a tad lower again this morning.

The US dollar was little changed this morning against most other majors. The only exception was some significant weakness against the Japanese yen. The USD/JPY fell below 161.30 overnight to hit its lowest level since this time last week. But bear in mind that it came close to a fresh forty-year high on Wednesday.

Source: TN Trader

The Japanese yen found some support following comments from Finance Minister Satsuki Katayama. She said that the government intends to encourage pension funds to increase investments in domestic financial assets. Analysts believe this strategy could provide more durable support for the yen than direct market intervention. The news helped to steady the bond market as yields fell.

Ms Katayama also said that she expected the Bank of Japan to raise interest rates gradually, even as the government pushed ahead with planned tax cuts and spending. So, the yen is up without the big, unwieldy stick of intervention. But it needs to build some upside momentum now. Otherwise, intervention, along with the risk of an unruly unwinding of the yen carry-trade, remains a real danger.

Gold prices drifted lower throughout yesterday evening and into the overnight session. They dipped below $4,100 as European markets reopened this morning, before buyers stepped in to halt the decline. The US dollar was mixed this morning. But it is no longer offering gold the support it has over the past two and a half weeks.

This was after the cash Dollar Index hit a thirteen-month high on the 24th of June. Its pullback from there helped to stem the selloff in gold, as gold found some decent support just below $4,000 per ounce. But the dollar now appears to have found some of its own support, as the Dollar Index looks perfectly relaxed, trading comfortably north of 100.00, previously a significant resistance level.

Source: TN Trader

The release of minutes from the Federal Reserve’s June monetary policy meeting has done little to help clarify the Fed’s thinking on rates. As things stand, the CME’s FedWatch Tool suggests that there’s still an 80% probability of at least one 25-basis point rate hike before year-end, and a 60% (up from 50%) chance that the first increase could come in September. Unless this drops significantly over the summer, it’s likely that the US dollar will continue to find support, which, in the current environment, will weigh on gold.

There’s little to add as far as silver is concerned, as it, like gold, is currently in thrall to the greenback as that negative correlation continues to hold. The only difference is that silver’s daily MACD looks more constructive than gold’s from a bullish perspective. This is because silver has curled up from very oversold conditions, whereas gold’s wasn’t nearly as stretched to the downside.

However, the MACD on its own is not a reliable indicator, and it would be unlikely that silver would diverge significantly from gold in the current situation. They have certainly diverged significantly in the past, but the gold-silver correlation has been tight for some time. Again, as with gold, it’s all about the dollar, for now.

Source: TN Trader

Oil prices rallied in the early hours of this morning, but then sold off as Middle Eastern traders hit their desks. Prices picked up once Europe opened, but overall, there was little change from yesterday’s close.

On Thursday, prices dropped sharply, having jumped earlier in the week as President Trump told NATO allies that, as far as he was concerned, the US ceasefire with Iran was over. This came after a string of tit-for-tat military actions, which kicked off this time last week around the Gulf and the Strait of Hormuz.

Hostilities picked up after Mr Trump’s statement and some additional unpleasant rhetoric. Then, just when it looked like things were getting out of hand, the President announced that Tehran had reached out to discuss an accommodation. This was somewhat surprising, but backed up by comments from officials from Qatar and Pakistan who said that efforts were underway to get peace negotiations restarted.

What to think? Bottom line: there’s less traffic passing through the Strait of Hormuz now than this time last week. There’s a possibility that peace negotiations could restart. It’s likely that they hadn’t been going in Trump’s favour, hence his NATO announcement. But why should they go any better for him now?

It’s no secret that Tehran wants to control the Strait of Hormuz, and that it insists on charging ‘fees’ on shipping to ensure their safe passage. If the Trump administration accepts this, they will be mocked around the world even more than they already are.

There may be a way around this. But it’s likely to be a drawn out process. In the meantime, oil has had an overdue bounce. But the daily MACD is still deep in negative territory, so another rally can’t be ruled out.

Source: TN Trader

Bitcoin rebounded strongly on Friday, climbing back above $64,000 and on course for a weekly gain as investor sentiment improved alongside broader equity markets. Bitcoin's recovery was triggered by gains across tech stocks, particularly in the United States, after the NASDAQ added over 1% on Thursday.

Despite the rebound, traders remain cautious. Recent market action has reinforced Bitcoin’s tendency to trade in line with broader risk assets, making it sensitive to changes in geopolitical sentiment and expectations for interest rates.

Market sentiment improved modestly heading into the end of the week. However, geopolitical risks remain elevated, and oil prices continue to serve as one of the clearest indicators of market direction. Any further escalation in the Middle East could quickly revive inflation concerns and alter expectations for global central bank policy.

Investors will also begin shifting their focus toward corporate earnings next week, with major financial institutions set to kick off the second-quarter reporting season. The combination of earnings results, ongoing geopolitical developments, and expectations surrounding future interest rates is likely to determine market direction in the weeks ahead.

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