Mixed start for Asian Pacific stock indices

US stock index futures were firmer in early trade on Monday, adding to the gains made at the end of last week. Sentiment had been quite negative on Friday morning, following the huge stock market reversal the previous day. This was when an initial rally on the back of yet another stellar earnings report from Nvidia suddenly reversed.

Tech stocks led a selloff which saw all the US majors close in negative territory, and at their lows, on Thursday night. The selling continued into Friday morning in a move which saw the S&P 500 come within a few points of 6,500 to hit its lowest level in six weeks.

Source: TN Trader

The NASDAQ 100 broke below 24,000 and traded at lows last seen in early September. But, once again, dip buyers came back in, encouraged by some dovish comments from the president and CEO of the Federal Reserve Bank of New York, John Williams.

Countering comments from other Fed members earlier in the week, suggesting there was little appetite for another rate cut in December, Mr Williams said that interest rates could fall in “the near term”. This saw the probability of a 25-basis point cut next month soar to 71% from 33% earlier in the day.

The news helped US markets stabilise after a difficult week, and the buying was in sufficient quantity to push all the major indices to a positive close, led by the small-cap Russell 2000. Despite this, it was a negative week across the board. 

The Dow fell 1.9%, while the S&P and NASDAQ lost 2.0% and 2.7% respectively. The Russell ended the week down 0.8%, helped by a 2.8% rally on Friday. The IT sector dropped 4.7% while Healthcare outperformed, gaining 1.8% for the week.

November is proving to be a challenging month. There have been growing concerns over the Artificial General Intelligence (AGI) trade. Some analysts have gone beyond warning about the high valuations of corporations at the vanguard of AGI. They are also pointing to the circularity of investment within the sector and the appearance of ‘vendor financing’.

Added to this are complaints about accounting procedures, primarily the stretched depreciation on high end chips, which already have a relatively short shelf-life, due to deterioration in functionality, and of course, obsolescence as chip design improves. Add in news that influential market players such as Peter Thiel and Michael Burry have cut their exposure to/gone short of Nvidia, and it’s easy to see why confidence may have taken a hit.

The week ahead brings thin holiday-driven trading conditions thanks to Thanksgiving on Thursday. Trading volumes are likely to drop off on Wednesday, and, with many market participants likely to make a long weekend of it, should remain depressed until the following Monday. A lack of liquidity could lead to increased volatility, so traders should think carefully about risk management this week.

In the meantime, investors will focus on economic data as it starts to trickle in now that the government shutdown has ended. Last week saw the release of ambiguous labour data, with an improvement in payrolls, but an uptick in the Unemployment Rate.

Tomorrow brings updates on Retail Sales and wholesale inflation.  Earnings season is nearly over. But Tuesday sees releases from Alibaba, Dell, Best Buy, HP and NIO, with Deere and Li Auto on Wednesday.

European stock indices had a constructive start to the week. Investors responded to US dip-buying on Friday, which helped to counter recent weakness. Dovish comments from New York Fed CEO John Williams provided the catalyst for buyers to come back in following a torrid price reversal on Thursday.

Source: TN Trader

European investors followed suit, bidding up stock indices in this morning’s early trade. But then things started to fragment, as US stock index futures pulled back from their best levels. The increased probability of a Fed rate cut next month helped to boost risk appetite. But this may not be sufficient to lift global equities to fresh all-time highs before the year-end.

Investors are getting nervous about tech stocks. They may be forced to cut back their collective exposure on any evidence that the recovery is fading. Particularly given the amount of leverage that many are employing.

The German Ifo Business Climate survey came in a tad weaker than expected. But with no significant economic releases scheduled for Europe today, the focus shifted instead to upcoming political and fiscal developments.

In the UK, investors are preparing for Wednesday’s Autumn Budget, where speculation continues over the scale of tax adjustments aimed at stabilising government finances.

Meanwhile, sentiment remained sensitive to reports surrounding ongoing US-Ukraine peace talks, particularly given concerns that the earlier 28-point proposal was viewed as overly favourable to Moscow and demanded significant concessions from Kyiv.

There was a mixed start to the week across Forex this morning. The US Dollar Index was a touch softer. It continues to track sideways while remaining a tad south of significant resistance at 100.00 on spot, or 100.25 on the December contract. The shift in US interest rate expectations, following John Williams’s speech on Friday afternoon, has made further upside progress more difficult; now there’s a greater chance of a cut next month.

Source: TN Trader

Otherwise, the Japanese yen continued to weaken. The USDJPY rallied this morning, but was still below 157.00, some way south of Thursday's 10-month high of close to 158.00. Traders expect the Bank of Japan to raise rates, maybe as soon as next month, particularly as wage growth is expected to be solid.

There’s also the increased risk of policymaker intervention to support the yen, should it continue to fall, despite the anticipation of higher rates. The yen has weakened as the new Japanese government embarks on another round of hefty fiscal stimulus.

Gold traded near the middle of its recent range as markets reassessed the likelihood of another US rate cut before year-end. It continued to hover north of $4,050 an ounce following a modest decline last week.

So far, support has held at $4,000, and the daily range has closed in, with $4,100 acting as resistance. This consolidation has seen the daily MACD track down a touch, and this should continue to be the case should gold continue to move sideways. As things stand, it’s difficult to see what may trigger a move in gold in either direction.

Source: TN Trader

The US dollar is stuck, and there’s still plenty of uncertainty around what the Federal Reserve may decide at its monetary policy meeting in a fortnight’s time. Could it suddenly reemerge as a haven play, should equities take another lurch lower?

Silver took a dive on Friday, falling to a near two-week low of $48.64. It subsequently rallied and came close to hitting $50.50 as trade opened in today’s Asian Pacific session. It then pulled back but was clinging on above $50 per ounce at lunchtime in the UK.

Like gold, silver’s daily MACD is drifting lower and should continue to do so should silver continues to trade sideways. Otherwise, traders appear to be sitting on their hands, waiting for a catalyst and the next big move.

Source: TN Trader

Oil was little changed this morning, albeit with a slightly negative bias. Front-month WTI was back below $58 per barrel, having traded well north of $60 in the middle of last week. Traders were focused on the possibility of a US-brokered (although apparently Kremlin-written) deal to end the Ukraine-Russia war.

Source: TN Trader

This increased likelihood of a breakthrough deal could ultimately lead to increased supply should sanctions on Russian energy be removed. This will add oil to a market that is already well-stocked.

While Sunday’s US-Ukraine talks were described as “productive,” uncertainty lingered, with European leaders cautioning that parts of the framework remain too generous toward Moscow. Unfortunately, accusations of massive corruption within the Ukrainian government have weakened President Zelenski’s hand.

Gas prices dropped around 2% in early trade on Monday. Yet trade was relatively subdued, and prices remain within sight of the ten-month highs hit over the last fortnight.

Overall, prices appear to be consolidating, and this is helping the daily MACD pull back from overbought levels. The tone contrasted with the more pronounced swings seen earlier in the month, with markets now awaiting fresh weather and demand signals.

On Friday, Bitcoin fell back towards $80,000, hitting lows last seen back in April this year. Ether fell back towards $2,600, dropping into a band of support which stretches from $2,800 to $2,500.

Both subsequently bounced, in moves which echo those across US equities, particularly the tech sector. Both are deeply oversold according to their respective daily MACDs. But they may need to see a continued bounce-back across US tech before they can find a floor from which to rally.

The VIX dipped by around 1% in early trade on Monday. But the December futures continued to hold comfortably above 20.00. This reflects a market that has regained some composure but still faces thin liquidity, ongoing tech-sector uncertainty, and shifting expectations around the Fed’s December meeting.

With trading volumes expected to decline further into the Thanksgiving holiday, volatility could remain sensitive to even small shifts in macro news.

US stock index futures pointed to more upside as investors looked to extend Friday’s rebound. While seasonal patterns and historical tendencies continue to favour the bulls into late November, the broader picture remains divided. Some view the recent pullback as a necessary cooling period after months of aggressive AI-driven gains, while others question whether the latest bounce represents anything more than a temporary pause in a deeper correction.