KOSPI bull roars

US stock index futures were mixed in early trade this morning following yesterday's tech-led recovery. While the Dow ended Wednesday effectively unchanged, the S&P 500 edged up 0.3% while the NASDAQ added 0.5%. As noted above, Wall Street's 'scores on the doors' weren't particularly dramatic, but the 19% surge in both CoreWeave and Super Micro Computer following upbeat quarterly results reinvigorated the tech sector, particularly anything AI-adjacent.

Source: TN Trader

Yet overnight there were some notable negative moves. Cisco fell close to 6% after releasing better-than-expected results which just weren't better-than-expected enough. Photonics and semiconductor manufacturer Coherent dropped 4.8% despite a strong fourth quarter, having jumped 8.2% ahead of its earnings report.

NVIDIA competitor Cerebras, which went public in May, lost a thumping 18.3% after a revenue miss, although it had rallied 20% ahead of its announcement after Wednesday's close.

But most of the focus yesterday was on the latest US inflation update which came in the form of the July Consumer Price Index (CPI). This showed inflation easing slightly, and bang in line with expectations. Core CPI slipped to 2.5% year-on-year from 2.6% last month.

Headline, which includes food and energy, was also a touch softer than the prior update coming in at 3.4% year-on-year. This has helped to take the pressure off the Fed as FOMC members consider hiking rates this year. The CME's FedWatch Tool now assigns a 34% probability of a rate hike at next month's meeting, down from 50% ahead of the release. The likelihood of at least one 25-basis point rate hike before year-end fell to 71%, which is still quite high, but down from 78% yesterday morning.

Now traders will watch for today's wholesale inflation update with July PPI due at 13:30 BST. This is expected to fall to 4.2% year-on-year, from 4.7% in June. But even if it does, it is worth bearing in mind that all the major US inflation measures, including Core PCE, remain well above the Fed's 2% target. This is why analysts still expect the Fed to raise rates this year, even after two successive months of poor Non-Farm Payroll reports.

The prospect of less aggressive monetary tightening from the Fed for the rest of this year should certainly provide a tailwind for equities. But analysts make the point that softer oil prices tied to June's short-lived US-Iran ceasefire had flattered July's number. Meanwhile, that agreement has unravelled, with crude now well above the lows hit at the beginning of July.

European stock indices had a quiet start on Thursday but began to push higher as the session progressed. US stock index futures picked up as oil prices pulled back from highs hit earlier in the week. While US-Iran peace efforts remained stalled and disruption around the Strait of Hormuz persisted, the focus for oil traders has shifted towards talk of slowing demand growth.

Yesterday the International Energy Agency (IEA) said global oil demand was likely to fall further than previously expected for the rest of this year. All the major European indices remain at, or near, to their all-time highs. This includes the UK's FTSE 250, although the FTSE 100 is still slightly adrift. Earlier this morning, the FTSE 100 was down 0.3% even after data showed the UK economy unexpectedly expanded in June. But it recovered as the session progressed.

Source: TN Trader

There was some relief yesterday after US inflation data came in a touch softer and in line with expectations. This eased concerns over renewed price pressures and further Fed tightening, though sentiment in Europe stayed subdued given the lack of progress on the blockaded Strait of Hormuz.

The European earnings season is entering its final stretch, with only a handful of companies left to report. Danish shipping giant Maersk was a standout, as it jumped over 8% after comfortably beating profit forecasts and raising its full-year guidance for a second time this year. The US-Iran war and strong demand pushed freight rates higher.

The US dollar took a dip lower following yesterday's CPI release. This showed that inflation continuing to moderate in July, after softening significantly in June, which led traders to pare back their expectations for a Federal Reserve rate hike before year-end.

This, along with last Friday's poor labour market numbers, has helped to take the pressure off the Fed to hike rates aggressively this year. The CME's FedWatch Tool now assigns a 34% probability of a rate hike at the next monetary policy meeting in mid-September. This is down from 50% ahead of the release.

Meanwhile, the likelihood of at least one 25-basis point rate hike before year-end fell to 71%, which is still quite high, but down from 78% yesterday morning. All eyes turn to today's wholesale inflation update with July PPI due at 13:30 BST. This is expected to fall to 4.2% year-on-year, from 4.7% in June.

Even so, traders remain wary of inflation risk stemming from volatile oil prices tied to the US-Iran standoff. President Trump has claimed that the US has total control over the Strait of Hormuz, although that seems to be far from the truth when counting ships and tankers passing through the Strait. Indeed, Iran has been in discussions with Oman concerning ways to divide up the Strait and charge shipping for passing through it.

Ten days ago, the USD/JPY fell to 155.25, a three-month low, following joint US-Japanese intervention to support the yen. The USD/JPY is already back over 159.00 which suggests that this intervention hasn't been a roaring success. But that's not to say that the US and Japan won't club together and give it another go. Traders continue to watch the 160.00 level closely, as this is considered the new threshold likely to trigger a fresh round of coordinated or solo yen-buying operations from Tokyo.

Source: TN Trader

CNBC reported that Goldman Sachs says that Japan has 'plenty of capacity' for further intervention with around $1 trillion in reserves.  It calculates that the size of the July intervention was roughly $200 billion.

Both gold and silver sold off during today's Asian Pacific session. Gold came within a couple of cents of $4,450 overnight before sellers came in to send it back down below $4,370. Some buying emerged soon after the European open, but not enough to push prices back over $4,400 so far.

Source: TN Trader

Yesterday both gold and silver rallied as the dollar sold off. US CPI softened while coming out in line with expectations. But the relief that US inflation hadn't turned up again faded relatively quickly. There's still the risk that the bounce in oil prices since the beginning of July as the US-Iran memorandum of understanding got ripped up looks likely rekindle inflationary pressures next month.

Source: TN Trader

Despite this, the probability that the Fed is forced to raise rates aggressively this year to counter inflation has eased significantly. If that's the case, then that removes a headwind for gold and silver, particularly if the US dollar starts to lose its appeal. Traders will be keeping a close eye on the dollar today to see how it reacts after the US wholesale inflation numbers are released.

Crude oil prices pulled back a touch in early trade on Thursday. Reports from both the International Energy Agency (IEA) and OPEC showed a drop in future consumption as global demand growth slowed. This had been a feature of the oil market for many months, if not years, ahead of the US/Israeli attack on Iran at the end of February.

Source: TN Trader

On top of this, the latest inventory data from the US Energy Information Administration showed a significant, and unexpected, jump in crude inventories. US commercial crude inventories posted their largest weekly gain since January 2023 as exports slumped.

Meanwhile, a senior Iranian source said yesterday that there had been no progress in talks to revive June's peace deal with its memorandum of understanding. And no matter what President Trump may claim, there is no evidence that the US has control over the Strait of Hormuz, let alone that shipping can pass through it safely. 

Bitcoin was a touch firmer in early trade this morning, but relatively directionless, following a three-day selloff. Bitcoin continues to trade nearer the lower end of a range between $62,000 and $66,000 which has been developing over the past month or so.

Pressure has mostly been to the downside after Strategy, the world's biggest bitcoin treasury company, announced that it had sold more of its bitcoin holdings. CEO and founder, Michael Saylor, has said for many years that he would only accumulate and hold bitcoin, so recent sales have disappointed his followers and other bitcoin bulls.

But Mr Saylor insists that his long-term strategy hasn't changed, but he needed to test the premise that his company could sell bitcoin without collapsing confidence in the market. So far, so good.

The front-month (August) VIX sitting at 16 says it all - little sign of worry, fear or even much interest in the latest headlines out of Washington. The data focus today is squarely on PPI and weekly jobless claims, with earnings due from Applied Materials, JD.com and Nebius, alongside a clutch of big Danish names including AP Moller-Maersk, Orsted, Pandora and Zealand Pharma.

Markets are pricing a September Fed rate hike at 34%, down from 50% ahead of yesterday's CPI numbers which all came in as forecast. President Trump and Iran remain as far apart as ever on the Strait of Hormuz, and it's not obvious they'll find common ground any time soon. Yet markets continue to look remarkably unbothered by the stand-off.

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