European equities follow US futures

US stock index futures drifted lower in early trade on Tuesday. This followed a decent session yesterday, which brought modest gains for the majors across the board.

As things stand, it looks as if this will be yet another positive month for US equities, despite a bit of a scare halfway through September. This came as investors expressed some doubt over the likely return on investment in Artificial Intelligence (AI).

This was brought into sharp focus after NVIDIA announced a $100 billion investment in OpenAI, owner of ChatGPT. That had many people wondering about the circulatory nature of this and similar investments. After all, it looks as if NVIDIA is giving its customers large amounts of cash so that they continue to buy the AI leader’s expensive, yet vital, chips.  

Leading chipmakers fell as sellers looked to cut their exposure. But any doubts over the industry were soon set aside when dip buyers rushed in, pushing US stock indices back up towards fresh record highs. While September is often cited as a difficult month for equities, it looks as if that won’t be the case in 2025.

Nevertheless, there’s still a hurdle to jump. A government shutdown, all but confirmed by Vice President JD Vance after President Trump meets with Democrats, now looks certain. The deadline for an agreement is midnight tonight, and while there have been previous shutdowns, with little market reaction, this could be more serious.

There’s a danger that it could lead to permanent job losses running into hundreds of thousands, along with concerns that Friday’s Non-Farm Payroll data may not be released. If so, that runs the risk of the US Federal Reserve running in a vacuum ahead of its next monetary policy meeting at the end of October. This would add another layer of uncertainty ahead of the Fed’s October policy meeting.

It’s also a concern that, should any shutdown be protracted, that could lead to other government economic statistics being delayed. In the meantime, investors may have to rely on other labour market statistics due out this week, including today’s JOLTS Job Openings, tomorrow’s ADP Payroll number and Thursday’s weekly Unemployment Claims update.

So, despite a strong September, risks remain elevated. Market participants are weighing whether record valuations can withstand the dual pressures of weaker labour conditions and the growing threat of a shutdown. The major indexes remain close to record highs, with the S&P 500 is up around 2.7% in September so far. The Dow has added 1.3%, the Nasdaq has climbed 4.7% while the Russell 2000 has added 2.5%.

Source: TN Trader

Asian Pacific stock indices ended the last day of the quarter mixed. There were gains for both Hong Kong’s Hang Seng and Shanghai Composite, which tacked on 0.9% and 0.5% respectively.

Chinese manufacturing activity improved modestly in September but remained in contraction for a sixth straight month. The official Manufacturing PMI came in at 49.8, slightly better than expectations of 49.6, and up from the prior reading of 49.4. helping lift mainland markets.

The Non-Manufacturing (Services) PMI drifted a touch, coming in bang on 50.0, down from the previous update and the consensus expectation, which both stood at 50.3. These data sets continue to indicate sectors which are limping along.

Manufacturing has effectively been flatlining since April 2023, while Manufacturing has done little this year, and remains way below where it was in March 2023. In other news from China, shares in Zijin Gold surged more than 60% in their Hong Kong debut, adding to the session’s upside momentum.

Meanwhile, the Japanese Nikkei 225 fell 0.3%, while Australia’s ASX 200 slipped 0.2% after the Reserve Bank of Australia (RBA) kept its cash rate unchanged at 3.60%, as expected. The RBA confirmed that it would assess policy on a meeting-by-meeting basis, citing persistent inflationary pressures tied to housing, food and energy costs. Economists expect continued caution from the central bank as inflation continues to hover at its highest level in more than a year.

The US dollar drifted lower overnight, compounding recent losses. The Dollar Index dropped back towards 97.00, having topped 98.00 at the end of last week. That small retreat was enough to open the door for gains in both the yen and commodity-linked currencies, which took the lead in overnight Forex trading.

The Dollar Index is now retesting support around 97.30 - 97.40, an area that acted as resistance at the beginning of last week. If it can hold this level, then there’s a chance that it could rebound and have another attempt to break above 98.00 convincingly. But a significant, and protracted, break back towards the 97.00 area could undermine any bullish confidence in the greenback.

Meanwhile, the Japanese yen was in focus this morning. The currency made decent gains across the board, holding firm after recent weakness. At the end of last week, the USD/JPY came within a few cents of breaking above 150.00.

Source: TN Trader

Since then, the dollar has pulled back, and the pair is currently testing dollar support around 148.00. Commodity crosses, such as the Aussie, also benefited from the weaker dollar. The overall picture remains one of a softer dollar environment, though moves were measured rather than aggressive, with traders awaiting fresh catalysts before committing further.

Having punched through $3,800 yesterday, the gold price surged to hit another record intra-day high of $3,870. Traders were speculating that $4,000 per ounce was in easy range. But in what now looks like a blow-off top (if only a temporary one), it suddenly turned lower just after the European session opened for business.

Over the next few hours, the price of gold fell back sharply to break below $3,800. It has managed to stabilise over the last hour or so, just above $3,800, but does look vulnerable to further selling. Despite this, there may be plenty of traders looking at this morning’s price action and considering if it is an opportunity to buy in at cheaper levels.

While gold could certainly bounce from here, and the shorter-term MACDs have fallen back from overbought levels, the daily MACD has, understandably, barely moved. It could be that gold has further to fall, and there’s little in the way of obvious support between current levels and $3,430 or so.

Alternatively, gold could start to churn away around current levels until the MACD resets at lower levels. Time will tell.

Source: TN Trader

There’s been a similar situation in silver today. Silver first pushed above $47 per ounce early yesterday morning. This took it to its best level since May 2011, just as it was coming off its all-time high of around $50.

The hourly price action since then suggested that silver was happily consolidating around $47 and potentially setting itself up for an assault on its all-time high from over fourteen years ago. But the daily MACD was offering up a warning that it was extremely overbought.

Of course, this doesn’t matter until it suddenly matters. Just as gold began to sell off, silver turned sharply lower, taking it back below $46. While the shorter-term MACDs have turned sharply lower, the daily continues to suggest that silver is overbought.

Like gold, it could rally back from current levels, but it may need to pull back further, or consolidate for longer, for the MACD to reset at levels from which a strong rally can begin.

Source: TN Trader

Crude oil fell over 3% yesterday, and the sell-off continued this morning. The story being put about was that traders were responding to news of additional supply coming online. This increase is due to an agreement reached a week or so ago between Iraq and the Kurdistan region to renew oil flows through a pipeline that runs through Turkey.

This pipeline had been shuttered since March 2023. But its reopening should allow around 200,000 barrels per day of crude to flow through for export. At the same time, OPEC+ will meet again this weekend. The group is expected to announce another increase in output, once again unwinding production cuts first put in place in April 2023. Front-month WTI closed above $65 on Friday.

Earlier this morning, it broke below $63. It continues to trade in a range which has been building since August. The upper end comes in around $65, while the first level of significant support is between $62-$61.70. This week’s price action reverses last week’s bullish move, which came because of increased Ukrainian attacks on Russian energy infrastructure.

Source: TN Trader

Natural gas prices jumped 3% yesterday and have edged lower overnight. The move reflects a typical pattern for gas markets, where large swings are often followed by periods of consolidation.

Source: TN Trader

The question now is whether the latest slip signals the start of a deeper pullback or simply a pause before another push higher. For now, the market remains range-bound but is still supported above key levels. Looking at yesterday’s move on the chart suggests some renewed short-term bullishness, given that gas has broken above recent highs.

Bitcoin prices steadied over the weekend, having fallen sharply since the middle of September. Bitcoin had been trading just shy of $118,000 just a few weeks ago. But it then turned sharply lower to break below $110,000 towards the end of last week.

It came close to taking out $115,000 overnight but has since pulled back. But its daily MACD has begun to curl up, so there’s a chance that it can recover lost ground. Nevertheless, there’s a bit of a ‘risk-off’ feeling as the quarter-end approaches, and that could give sentiment a knock.

The VIX has pushed higher so far this week, but not dramatically. This suggests that investors are adding some hedges on the looming risks around US politics and economic data. Yet the increase has been muted, suggesting that traders are comfortable with current market conditions and are waiting for bigger catalysts before positioning for higher volatility.

With several key data points and political developments still ahead this week, the calm tone in volatility may prove temporary. For now, however, the VIX signals a steady backdrop, reinforcing the sense that investors remain cautiously confident.

Markets continue to wrestle with the potential US government shutdown, though the impact has yet to show in price action. Futures were lower in early trade, suggesting investors are cautious but not panicked. The quarter-end also brings the potential for positioning-related volatility.