Asian Pacific markets end mixed

US stock index futures were firmer this morning, extending a sharp bounce which began early on Friday afternoon. The move mimicked that from the week before, when the S&P 500 fell back below 6,650 and then rallied sharply into the close.

Source: TN Trader

The US majors ended Friday’s session little changed, although the old school Dow dropped 0.7% on some profit-taking. Selling pressure on both tech and small caps led to weekly losses on the NASDAQ and Russell 2000 of 0.5% and 1.8% respectively.

The longest government shutdown in history came to an end on Wednesday. It’s doubtful if this had any effect on investor behaviour, as previous shutdowns have been largely ignored by financial markets.

However, this one has led to the postponement, and even cancellation, of some significant government data concerning the labour market and inflation. This has led to worries that the Federal Reserve may lack insight into the state of the US economy as it considers whether to cut rates again at next month’s monetary policy meeting.

Last week, a string of FOMC members, including Beth Hammack and Susan Collins, cast doubt over the appropriateness of a 25-basis point cut in December. This saw the probability of a further reduction in borrowing costs drop below 50%, having been as high as 95% a month ago. There is hope that government data will soon be released, with a possibility of Non-Farm Payrolls coming on Thursday.

The other major consideration for investors is the health or otherwise of the Artificial General Intelligence trade. Nvidia and Palantir sold off sharply last week after Michael Burry, of ‘The Big Short’ fame, announced that he had established significant put option positions in both companies. These would pay off if the stock prices weakened from current levels.

Mr Burry indicated that it was not just a question of highly elevated valuations. He also criticised the accounting practices of several tech giants, accusing them of extending the time taken to depreciate their assets. This, combined with news that SoftBank had liquidated its Nvidia holdings, only to increase its investment in ChatGPT owner OpenAI, led to a selloff across the tech sector.

In addition to Nvidia, Palantir and SoftBank, other big losers include Meta Platforms, Oracle, Broadcom and Super Micro Computers.

Otherwise, it has been business as usual. Investors and traders did what they have been doing since October 2022, hoovering up equities on any selloff. We’ll see if that’s still the case after Nvidia reports after Wednesday’s close. With Walmart and Home Depot also reporting, markets will also receive a clearer read on the strength of the US consumer.

European stock indices largely ignored the positive tone across US stock index futures this morning as equities across the region came under selling pressure. The tone remained cautious following a lacklustre performance across European markets last week, driven by renewed concerns around global growth and the sustainability of the AI-driven rally.

The French CAC, Euro Stoxx 50, and the UK’s FTSE 100 all hit record highs early last week, before pulling back in the second half. The German DAX continues to consolidate, having effectively gone sideways since the end of May.

Source: TN Trader

Monday saw no major earnings or data releases from the region, leaving broader sentiment and political developments to set the tone. The UK’s Chancellor of the Exchequer, Rachel Reeves, remains under intense scrutiny ahead of her Autumn Budget on 26th November.

Some observers are now speculating that this budget could be as destabilising for financial markets as Kwarsi Kwarteng’s from 2022 when Liz Truss was briefly Prime Minister. 

The current Chancellor’s adherence to strict fiscal rules has narrowed policy options, forcing consideration of either significant spending cuts or potential tax adjustments, each politically sensitive and economically contentious.

Polling shows that raising taxes risks voter backlash. Yet Friday’s moves in Gilts suggested that parts of the market may welcome a more revenue-focused approach. Gilts slumped, and yields soared, after yet another Treasury ‘leak’ suggested that the much-hyped hike in income tax was now off the table.

Forex markets were relatively subdued in early trade this morning, with the main feature being the continued pick-up in the US dollar. The Dollar Index pushed back up over 99.00, having dropped to 98.62 on Thursday last week.

The turnaround came as a clutch of US Federal Reserve officials stated that they would prefer to keep the Fed Funds rate unchanged at next month’s meeting, rather than making another cut. This boosted the dollar’s appeal somewhat, although the Dollar Index is still a long way below the recent high of 100.00, which was hit less than a fortnight ago.

Meanwhile, the Japanese yen continued to draw attention as it continues to display some weakness. The USD/JPY has been trading just shy of 155.00 since Wednesday last week. So far, any attempt to push above this level has been met with dollar selling/yen purchases.

The Bank of Japan remains a quiet but notable presence in the background, and the currency’s ability to stabilise despite broader dollar firmness stood out in an otherwise low-energy trading environment. Overall, the FX space lacked momentum, mirroring the hesitation seen across the broader market.

Source: TN Trader

Gold was choppy again this morning. Prices came under selling pressure at the end of last week. On Friday, gold dipped below $4,050 in early afternoon trade but then rallied above $4,100 before pulling back as the close approached.

Earlier in the week, it had pushed above $4,200 for the first time in over three weeks. But it was unable to hold above here, suggesting that, as things stand, the conditions aren’t yet ready for a larger rally.

Earlier this month, the daily MACD hit neutral, having indicated extremely overbought conditions in mid-October. But after curling up, the MACD appears to be flattening off again, suggesting that upside momentum has faded.

Gold hasn’t been helped by comments from FOMC members last week, suggesting that the Fed should keep rates unchanged at its monetary policy meeting in December. This led to a jump in the dollar and a loss of nerve amongst gold’s bullish traders.

Source: TN Trader

On Thursday morning, silver traded at $54.39, coming close to its all-time high of $54.60 from mid-October. From there, it sold off sharply, dropping to within a few cents of $50 per ounce on Friday afternoon for an overall loss of around 8%. It has steadied this morning and has pushed back above $51.

Despite this, its own daily MACD has flattened out, suggesting a drop in upside momentum. This week could test the downside potential, with a prolonged break below $50 an indication that silver may have further to fall as it seeks out some solid support.

Source: TN Trader

Oil was a touch firmer this morning, building on Friday’s gains. But front-month WTI remained stuck below $60 per barrel even as traders assessed the effectiveness of recent attacks by Ukraine on Russian energy infrastructure.

Source: TN Trader

Last week, Russia suspended loadings at a major facility on the Black Sea for two days. But loadings resumed on Sunday. Over the longer term, traders continue to keep in mind ongoing supply and demand forecasts. Last week, OPEC updated its previous supply forecast.

It now expects a small surplus in supply throughout 2026. This brings it into line with other agencies and represents a change from its prior analysis, which predicted a supply shortage when measured against its outlook for future global demand growth.

Gas traded lower this morning. Traders took some profits as gas continued to hold around eight-month highs.  The market appears to be consolidating following a strong bull run, which has seen prices rally 75% from the lows of late August into the highs seen last week. 

Crypto markets stabilised to start the week. Bitcoin recovered towards $95,000 while Ether broke briefly above $3,200, having held $3,000 as support last week. The tone across digital assets was cautiously constructive, with traders showing willingness to step back in, despite broader market uncertainty and ongoing volatility in risk assets.

The VIX was steady this morning, while reflecting a slight cooling of risk aversion after last week’s turbulence. The index remains elevated relative to recent lows. Yet it also suggests that markets are regaining some composure following the sharp repositioning seen across tech and AI names.

The decline also underscored the market’s wait-and-see stance heading into a pivotal week for earnings, Fed comments and delayed economic data.

A packed week lies ahead, with earnings from major retailers including Walmart, Home Depot, Lowe’s, Target and Ross Stores, alongside the highly anticipated Nvidia report on Wednesday evening.

Fed speakers are also expected throughout the week, keeping monetary policy expectations at the forefront. With the US government now reopened, delayed economic figures could drop at any time. Jobs data remains pencilled in for Thursday, but the schedule remains fluid. The Fed remains a 50/50 proposition for a December rate cut, leaving traders on high alert as markets await clarity.