Asian-Pacific tech stocks retreat as yields climb

US stock index futures came under further downside pressure this morning following Monday's decline. Tech stocks were taking the brunt of the selling pressure with some notable tumbles across the chip sector. The NASDAQ 100 fell over 1% in early trade this morning while significant players such as Micron, Marvell and SK Hynix were all down around 5% each.

Intel had lost 4% at the time of writing, while other semiconductor stocks were also in the red. Last night the Dow and S&P 500 fell 0.5% while the NASDAQ and Russell 2000 lost 0.3% and 0.4%, respectively.

Source: TN Trader

Yesterday's near 4% rally in crude oil was one of the catalysts for equity weakness as investors weighed the risk of an escalation in hostilities between the US and Iran. The memorandum of understanding that both sides signed back in June has expired, and President Trump said he saw no reason to extend the ceasefire.

He then upped the ante somewhat when he threatened to bomb Oman, a key US ally in the region, if it didn't 'get out of the way'. Oman has been negotiating with Iran to find ways to reopen the Strait of Hormuz. Iranian media also reported that Tehran had seized a UAE-owned oil tanker.

US Treasury yields have continued to push higher, with the 30-year closing in on a twenty-year high. This comes as US debt levels continue to ramp up, and on fears that rising oil prices will once again push up inflation.

At the same time, analysts are concerned about extra Treasury supply coming onto the market. Not just to fund federal spending, but also should Japanese investors sell US Treasuries to reinvest back in Japan to support the yen.

NVIDIA, which reports earnings next week, was down 2.3% overnight. This came after the chip designer, and the world's most valuable corporation by market capitalisation, announced up to $105 billion of financing for a new OpenAI data-centre campus in Ohio. Investors are increasingly wary about the circular nature of AI-related financing, as well as being unsure over the size, and timing, of the likely returns on these investments.

Meanwhile, investors get another clue as to the health, or otherwise, of the US consumer. After last week's poor Retail Sales number, and weak payroll numbers the week before that, today sees earnings from Home Depot, with Target, Lowe's, TJX and Walmart to follow this week.

European stock indices extended their selloff on Tuesday, driving benchmarks such as the Euro Stoxx 50 to a two-week low, and wiping out all this month's gains for the French CAC. The German DAX has proved a touch more resilient. But it fell to a 10-day low this morning as investors responded to higher bond yields and oil prices, as the ceasefire between the US and Iran formally ended.

Reports suggest that Iran has now pivoted to a fully offensive military posture. Yesterday President Trump said he saw no need to extend the ceasefire. He then lashed out at Oman, an ally of the US in the region, threatening to 'bomb the shit' out of them if they got in his way. The Strait of Hormuz remains effectively closed with nothing passing through, following a brief uptick in traffic after the US-Iran memorandum of understanding was signed in mid-June.

Meanwhile, and despite gains for oil giants like BP and Shell, the UK's FTSE 100 looks weaker than most European, or US, stock indices. As the chart shows, the index has fallen steadily since the end of last month and is now retesting support around 10,700 and at lows last seen on the 24th of July.

Source: TN Trader

The US dollar was a touch firmer against all the majors overnight, but off the highs hit in early European trade. Yesterday morning, the cash Dollar Index briefly dipped to 99.00 to hit a 10-week low. But there appears to be some mild support around this level, although the upside appears capped with resistance around 99.40.

Since the US/Israeli attack on Iran at the end of February, the US dollar has benefitted from a 'flight to quality' any time the situation has escalated. As the US-Iran ceasefire officially ended yesterday, with Iran threatening to go on the offensive, and President Trump threatening to bomb Oman, an ally of the US, it wasn't surprising to see the dollar rally.

But on the flip side, the probability of a Federal Reserve rate hike at next month's monetary policy meeting has fallen significantly, from 50% to 34%. This followed news that US inflation has continued to soften a touch, and as payrolls and Retail Sales suggest that the consumer may be struggling a bit.

Meanwhile, the Bank of Japan, Bank of England and European Central Bank are all expected to raise rates, possibly at their next respective monetary policy meetings.

The Japanese yen extended its decline as the dollar drew support from soured risk sentiment. The USD/JPY rising for a second straight session, pushing up towards the 160.00 level. This is where Japan's Ministry of Finance undertook its failed intervention attempt back in April, and this has persuaded some traders that 160.00 could be the new line in the sand for further intervention.

Bear in mind that the US joined Japan in intervening to support the yen at the end of last month. While initially successful, the USD/JPY has now made back 50% of its intervention losses.

Source: TN Trader

Gold pushed up to $4,436 overnight before it reversed sharply and broke below $4,400 once again. That snapped a two-day winning streak as the dollar's overnight bounce from a ten-week low weighed on the precious metal. Inflation risks from higher oil prices continue to support the case for at least one 25-basis point Fed rate hike in 2026.

The CME's FedWatch Tool puts the probability of this at 68%, while the likelihood of a rate hike at next month's meeting has fallen to 34% from 50% ahead of last week's inflation updates.

Meanwhile, yesterday's expiry of the US-Iran ceasefire raises the possibility of an escalation in hostilities between the two sides. If so, this looks likely to favour the US dollar, which, given the inverse correlation between the greenback and gold since the end of January, would suggest that gold may struggle to make much headway from current levels.

Indeed, $4,400 is working like a magnet for the price of gold. Given the ongoing consolidation around this level, the question is if this proves to be ceiling for further gains which raises the likelihood of a retest of $4,000. Or could it be a floor allowing gold to build up enough momentum for another rally?  Traders are keeping the bulk of their attention on Wednesday's FOMC minutes for the next possible catalyst.

Source: TN Trader

Silver traded in a tight range around $65.00. This level is acting similarly to gold's $4,400. But unlike gold, $65.00 isn't a particularly significant level of either support or resistance. Meanwhile, silver continues to trade roughly within a band of $63.50-$66.80, an area it has occupied for the past week.

Source: TN Trader

The probability of aggressive Fed rate hikes has been priced out to a great extent. Yet some members of the Fed's FOMC still seem convinced that inflation due to rising energy prices (historically a temporary phenomenon) should be met by raising borrowing costs. And yet, inflation has shown signs of moderating, while payrolls have weakened and Retail Sales are poor. Perhaps it won't be long before rate cuts start to be priced in as we get deeper into the second half of the year.

Earlier this morning, both Brent and WTI crude oil prices rose to their highest levels so far this month. Yesterday, the US-Iran ceasefire which followed the signing of a memorandum of understanding back in June expired.

President Trump said he had no wish to extend the ceasefire, while Iran said that it was switching to its offensive capabilities from defensive. Mr Trump also said that he was prepared to bomb Oman, a key US ally, if it didn't 'get out of the way'. Iran and Oman have recently signalled they are in talks over reopening shipping routes through the strait, though neither side has announced a firm agreement.

Meanwhile, there were reports that a vessel had been struck by an unknown projectile while transiting outbound through Hormuz. Iranian media separately said Tehran had detained a tanker linked to the UAE for violating its rules in the Strait. Mr Trump insisted that the US maintains full control of the Strait of Hormuz, yet shipping data showed commercial traffic through Hormuz still running at a fraction of pre-war levels.

WTI (the continuous contract) is retesting resistance around $85 per barrel. Given everything that is going on, many traders are surprises that prices aren't back over $100. But there's still this belief that the war will soon end, and that slowing global demand growth will once again put downward pressure on prices.

Source: TN Trader

Bitcoin slipped a touch this morning. Crypto markets broadly remained on the back foot amid continued US-Iran tension and growing anxiety over sticky inflation and interest rates. Bitcoin and the broader crypto complex stayed within a tight range as the US and Iran remained at odds over the Strait of Hormuz, with President Trump maintaining his threats against both Iran, and now Oman, over reopening the waterway.  

This week's sharp rise in oil prices has stoked concern over higher energy-driven inflation and, in turn, higher rates for longer, a scenario that tends to weigh on crypto. Bitcoin has remained on a broadly softer footing this year amid rate anxiety and continued delays to the Clarity Act, the closely watched US regulatory bill.

President Trump is expected to join crypto industry leaders at the White House on Wednesday for a session of his administration's newly formed innovation committee, bringing together crypto and prediction-market executives alongside traditional finance and AI representatives. That meeting sets the stage for a follow-up session at the Commodity Futures Trading Commission on Thursday, where further crypto regulation is expected to be on the agenda.

Sentiment has cooled a touch with the Gulf conflict intensifying. US Treasury yields continue to climb, with the 30-year at levels last seen in 2007. Home Depot, a Dow component, reports before today's open.

UK jobs data was little changed, and there's a run of minor US releases this afternoon including housing starts and industrial production, though none look market moving. Nvidia's backing of $105 billion in financing for OpenAI's Ohio data centre is the other big headline. Overall, the going is slow at best, with a modest downdraft taking hold as war headlines turn more negative following Washington's refusal to extend the ceasefire deadline.

Oil is creeping higher which is reinforcing the inflation narrative, although recent data releases still suggest that the Fed will leave rates unchanged next month. Markets are now heading into a historically more challenging few weeks. Tomorrow's release of minutes from the Fed's last monetary policy meeting is now the main highlight.

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