Asian-Pacific indices decline

US stock index futures were sharply lower this morning, with the steepest losses seen across tech and semiconductor stocks. The iShares Semiconductor (SOXX) Index dropped 4%, having lost 4.5% in yesterday's session. Micron Technology, AMD, Marvell Tech, Intel and TSMC were all down around 4% this morning. The selloff continued despite a solid set of results from TSMC yesterday morning.

Source: TN Trader

NVIDIA, the world's biggest corporation by market capitalisation, dropped 3%, while IBM lost 2.5%, adding to its 25% slump after it brought forward its quarterly earnings report to deliver a surprise profit warning. SpaceX also continued its path lower. It was down 4% this morning, falling below $125, well below its $135 IPO price from just over a month ago.

Investors continue to debate whether AI-related companies can justify their lofty valuations. While earnings and demand trends remain strong, recent profit-taking suggests some market participants are questioning how long the current pace of growth can continue. The question now is whether this will become yet another 'buy the dip' opportunity, or if the pace of selling accelerates as everyone rushes to the exit doors at the same time.

There was little comfort to be had away from AI-adjacent stocks. Netflix released its quarterly results after last night's close. Earnings were a touch better-than-expected, while revenues were a tad light. But traders were unimpressed and hit the 'sell' button, sending the stock down 9% overnight.

There are no significant earnings reports due out today, and the economic calendar is also light. But as investors head into the weekend, ahead of a pick-up in corporate results next week, they must also consider the latest military developments across the Middle East. According to US Central Command, dozens of Iranian military and maritime targets were struck overnight as part of an ongoing campaign aimed at degrading Iran’s military capabilities.

The renewed conflict has once again disrupted shipping and energy flows through the Strait of Hormuz, a critical route once responsible for transporting roughly one-fifth of global energy and other chemical supplies.

European equities traded lower on Friday as rising geopolitical tensions across the Middle East triggered another jump in oil prices. Tech stocks were among the weakest performers. The world's largest supplier of chip manufacturing equipment, ASML, fell by over 4% on the Dutch exchange. This was despite a solid set of quarterly results earlier in the week, along with positive forward guidance.

Source: TN Trader

The UK's FTSE 100 held up comparatively well, as it got some support from oil majors BP and Shell, along with many of the 'value' stocks which make up the index, while tech/growth is underrepresented.

Investors remain concerned that escalating military exchanges between the US and Iran could trigger renewed inflationary pressures through higher energy prices. Brent Crude oil has surged by around 25% since the beginning of this month, reigniting concerns that central banks may need to keep interest rates higher for longer.

FX performance was mixed this morning, although the US dollar was able to hold onto gains made yesterday. The cash Dollar Index managed to poke its nose back above the 100.50 level as investors balanced softer inflation data against rising geopolitical risks.

This week's US inflation reports have reduced expectations of an immediate Federal Reserve rate hike. Analysts have priced out any chance of a change in interest rates at the next FOMC meeting at the end of this month, although they still expect at least one 25-basis point cut before year-end.

Federal Reserve officials have maintained a relatively hawkish tone. Dallas Fed President Lorie Logan argued that inflation remains too high and suggested further policy tightening may still be necessary. Fed Vice Chair Philip Jefferson similarly indicated a willingness to support higher rates if inflation fails to improve.

On top of this, the US dollar continues to benefit from safe-haven demand as tensions between the US and Iran escalate. The ongoing conflict, combined with threats to major shipping routes such as the Strait of Hormuz and potentially the Red Sea, has increased uncertainty across global financial markets. The US has resumed its blockade of Iranian ports and has also attacked Greater Tunb Island in the Strait of Hormuz.

Meanwhile, the Japanese yen was a touch firmer this morning after Japanese officials renewed their warnings regarding excessive currency volatility. Finance Minister Satsuki Katayama reiterated that authorities remain prepared to intervene if necessary. Despite this, the yen remains under pressure from the wide interest rate differential between Japan and the United States, while concerns about Japan’s energy security amid disruptions in the Strait of Hormuz continue to weigh on sentiment.

Source: TN Trader

Gold was firmer this morning but still struggling to break and hold above the psychologically important $4,000 level. The precious metal continues to find support just below here, and it has so far managed to keep above the cycle low under $3,950 hit at the end of last month.

This week's softer US inflation data has reduced expectations of near-term Federal Reserve tightening. This triggered a sharp selloff in the US dollar and a rally in gold. But gold was unable to hang on to its gains, running into resistance around $4,100. This failure to break to the upside suggests that gold may still have further to fall before it can find a base.

Source: TN Trader

The trouble is that surging oil prices on the back of rising geopolitical tensions have revived concerns about energy-driven inflation, potentially requiring central banks to keep interest rates elevated. That is supporting the dollar, which, in the current environment, is undermining the case for holding gold.

Silver dropped steadily overnight, falling under last month's low of $55.50 to hit a fresh cycle low of $54.77. That was its lowest level since late November, prior to the parabolic surge which took it to a record high above $121 two months later.

Silver is struggling to make any headway for all the same reasons as gold. But it is approaching an area which may offer some support. The only trouble is that this area stretches down below $50 per ounce.

Nevertheless, silver has been correcting downwards for five and a half months now, so the selling is getting quite stretched. But it is only when the sellers have exhausted themselves that the bulls will have an opportunity to take back control. When, or where, that might happen, is far from clear.

Source: TN Trader

Oil prices rallied this morning and remained elevated as traders monitored ongoing military activity in the Middle East and the potential impact on global energy supplies. Front-month (September) Brent rallied to just shy of $86 per barrel today. Oil appears to be consolidating at higher levels now, with no strong indication that prices have finished correcting to the upside.

Having said that, Brent crude has rallied around 14% so far this week, adding to the gains made since the beginning of this month. It has now retraced around 50% of its drop from the middle of May into its July low.

So, the big question now is whether the current consolidation around the 50% retracement suggests that oil is building up momentum for another leg higher, or does it suggest that oil has run out of upside momentum and is about to resume its decline?

According to its daily MACD, oil is no longer extremely oversold. In fact, the MACD is back to the neutral level. Unfortunately, that's no help in forecasting where prices may go next. Can the US and Iran find some common ground and restart peace negotiations in earnest? Or will this war continue to drag on and weigh on global markets? Perhaps we'll know more this weekend.

Source: TN Trader

Having tested resistance around $65,000 this week, bitcoin took a hit overnight as investors reduced exposure to risk-sensitive assets. Softer US inflation data initially supported cryptocurrencies earlier in the week. But those gains faded as geopolitical tensions intensified and Federal Reserve officials maintained a hawkish stance.

Higher interest rates generally reduce the attractiveness of non-yielding assets such as cryptocurrencies by increasing the returns available from traditional fixed-income investments. Bitcoin remains under pressure from both macroeconomic and geopolitical factors. 

Bitcoin held up surprisingly well after the US and Israel launched their attack on Iran at the end of February. But after hitting a three-month high close to $83,000 back in May, bitcoin sold off and has struggled ever since. Investors are monitoring flows into spot Bitcoin exchange-traded funds, which appear set to record modest outflows this week after briefly ending a prolonged period of investor withdrawals.

Investor attention remains firmly focused on three key themes: geopolitics, inflation and earnings.

The conflict between the US and Iran continues to dominate headlines, with concerns growing that disruptions to energy supply routes could fuel a renewed inflationary cycle. Oil prices remain elevated, and markets are closely watching to see if tensions escalate further in the coming days.

Economic data will also remain important. Today's University of Michigan Consumer Sentiment survey and inflation expectations component could provide fresh insights into how households view the inflation outlook, while additional housing and industrial production data may offer clues about the strength of the US economy.

Earnings season is gathering momentum, with major companies including Tesla, Alphabet and Intel set to report in the coming days. Investors will be particularly focused on whether technology companies can justify their elevated valuations amid growing concerns about AI-related spending.

* 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.