Another record high for South Korea

US stock index futures were firmer across the board in early trade on Monday, carrying on the new month in much the way they left the old one. Friday saw modest gains for the Dow, S&P 500 and NASDAQ, while the small-cap Russell 2000 slipped 0.6%. But all the majors made solid gains for the week, and for the month as well.

For May, the Dow added close to 3%, while the S&P and NASDAQ gained 5% and 8%, respectively. The Russell was up just under 4%. Investors largely parked any concerns over the war between the US and Iran. The ceasefire announced back in April held, despite both sides accusing the other of breaching it. At the beginning of last week, both sides undertook hostile acts against each other.

Source: TN Trader

Despite these, investors went into the weekend in a bullish mood, largely convinced that a peace deal was close to being agreed. This optimism followed news that a 60-day memorandum of understanding between the US and Iran had been agreed, extending the ceasefire and allowing negotiations to continue.

Yet as Sunday drew to a close, all that was heard from President Trump was a statement saying that he was in “no hurry” to finalise a deal with Iran, as he had to ensure that it was a good one.

So, negotiations continue, with Mr Trump warning that military action remains a possibility if discussions fail to deliver guarantees that Iran will never obtain a nuclear weapon. Despite this uncertainty, the first quarter earnings season has provided a terrific tailwind for equities.

According to FactSet, of the 97% of S&P 500 constituents which have now reported, 85% of S&P 500 companies exceeded analyst earnings estimates during the first quarter, with 81% beating on sales. Even more significantly, the year-on-year earnings growth rate was around 28.6%, higher than at any time since the fourth quarter of 2021 as the world soared back to life after Covid lockdowns.

This week’s significant earnings updates include Palo Alto Networks and Broadcom. Investors will also turn their attention to Friday’s Nonfarm Payrolls report, which could play an important role in shaping expectations for Federal Reserve policy.

Unlike their US counterparts, European stock indices were softer across the board this morning, and trade was relatively subdued. There were some pockets of activity, primarily affecting the UK’s FTSE 100. EasyJet gapped up sharply on the open before settling down a touch. Traders reacted to comments made on Friday by the US private credit group, Castlelake.

Source: TN Trader

Castlelake said they were considering making a bid for the low-cost airline, but that they had not yet approached the board. EasyJet said this morning that any bid would be ‘highly opportunistic’ at this time, given the situation across the Middle East. But they also said that they would consider a proposal, should one be made. At the time of writing, the stock was up 8%.

Meanwhile, NVIDIA CEO Jensen Huang unveiled the company’s N1X processor. Mr Huang was at the Computex AI exhibition in Taipei and said that this new processor would lead to the reinvention of the computer. Other tech-related stocks also soared, including Arm, which was up 12%.

The US dollar was firmer across the board this morning as traders balanced ongoing geopolitical uncertainty against expectations for future Federal Reserve policy. Investors continue to monitor negotiations between Washington and Tehran, with discussions still ongoing but no final agreement yet reached. The cash Dollar Index pushed back up to within the bottom end of its established range of 98.80 to 99.20.

Last Friday, it dropped below 98.50 as investors exited ‘safe haven’ trades as hopes were raised that US/Iranian negotiations were about to produce a breakthrough. Last night, President Trump insisted that he was in no hurry to reach a deal, as it was more important to get a good result than one done in haste and then regretted.

Meanwhile, US interest rate expectations remain elevated. According to the CME FedWatch Tool, traders are pricing in around a 50% probability of rate hike(s) from the Fed before year-end. This expectation comes with concerns that energy-related inflation pressures could persist for some time to come.

The USD/JPY remains well bid, with the pair trading up to 159.50 this morning. Investors continue to debate whether the Bank of Japan will raise interest rates at its monetary policy meeting later this month.

Source: TN Trader

Gold was once again coming under downside pressure today as it struggled to hold above $4,500. Last week, it broke below $4,400 and looked on course to fall further. But buyers came in as the US dollar pulled back on hopes that the US and Iran were close to agreeing on a peace deal. The news saw the precious metal surge higher, coming within a few dollars of $4,600 on Thursday evening, just 36 hours after breaking below $4,400.

Source: TN Trader

Investors remain cautious as negotiations between the US and Iran continue. Although diplomatic discussions remain active, major disagreements over Iran’s nuclear programme and the future status of the Strait of Hormuz continue to create uncertainty.

On Thursday morning, silver broke below $72 per ounce. But, as with gold, a turnaround in the fortunes of the US dollar triggered a rally which saw it hit $76.68 late afternoon on Friday. It subsequently pulled back from here and then gapped down below $74.50 as it reopened after the weekend.

Since then, buyers have come back in. But they’re having trouble trying to push the price back up above $76, as it appears some resistance is building around here. As with gold, silver’s fortunes are currently inversely correlated to those of the US dollar. This means that the metal’s price is swinging around on combined expectations over the US/Iran war, as well as the outlook for Federal Reserve monetary policy.

Source: TN Trader

The dollar continues to find support as the Fed is now expected to raise rates before the year-end. This is helping to keep a lid on silver, although it may have a chance to break out to the upside should the war between the US and Iran come to an end.

Oil prices pushed higher this morning. The weekend failed to bring a breakthrough in peace negotiations between the US and Iran as many had hoped. Not only that, but Israel expanded military operations in Lebanon. This has increased concerns that any progress made between the US and Iran may now be under threat.

Source: TN Trader

Nevertheless, oil prices remain close to the lower end of the trading range that has been developing since early April. It appears that investors remain hopeful that a ceasefire extension can be finalised. Despite this, the Strait of Hormuz remains closed to most shipping and is still controlled by Tehran, despite the US blockade of Iranian ports in the region.

Last week, Bitcoin had a few attempts to break below support around $75,000. It took a few goes, but support finally cracked on Wednesday evening. Bitcoin then fell quickly to trade below $73,000, which is where it was hovering this morning. The next significant downside target is $70,000, and if that were to go, then the February low of $60,000 could be in play.

Sentiment towards Bitcoin has soured quite rapidly. This is despite the crypto showing impressive resilience throughout the first ten weeks of the US/Iran war. Now it appears that investors have become frustrated with its relatively slow upside progress, especially given the stunning gains seen across AI-related tech stocks, particularly semiconductors, since the end of March.

Technology stocks continue to lead global equity markets higher, supported by strong earnings, artificial intelligence investment and ongoing demand for semiconductor-related businesses. However, with valuations stretched in several areas and risk remaining elevated, markets may become increasingly sensitive to incoming economic data and geopolitical headlines.

While negotiations between the US and Iran continue, investors are watching for signs of a permanent agreement, particularly regarding Iran’s nuclear programme and the reopening of the Strait of Hormuz.

This Friday sees the release of the latest US Non-Farm Payroll report. Investors will also closely monitor the ISM Manufacturing and Services PMIs for additional clues on growth and inflation trends. The first quarter earnings season is winding down, but Broadcom updates on Wednesday, and this could prove important for AI-adjacent stocks.

* The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance.