Positive session for Asian Pacific indices

On Wednesday, US stock indices posted gains across the board. The Dow, NASDAQ and S&P 500 all added 1.2%, while the Russell 2000 finished 2.0% higher. They built on those gains yesterday, as investors piled in to ‘buy the dip’ following a mild bout of Trump-induced panic earlier in the week.

Source: TN Trader

The President had unleashed some fiery rhetoric aimed at Europe as he pushed for US ownership of Greenland by any means, including by force. But he dialled back the threat during his speech at Davos on Wednesday afternoon, giving traders and investors the ‘all clear’ to reestablish their exposure to risk assets.

President Trump said that he had no intention of using force and would get what he wanted by other means. He also withdrew his earlier threat of tariffs aimed at eight European countries and members of NATO. Equities rose further after Mr Trump concluded a meeting with NATO’s General-Secretary, Mark Rutte.

The US President stated that a framework was in place for a deal over Greenland, although he declined to offer any details. So, investors were more than happy to park that one, call it a victory and move on. But have they?

US stock index futures were firmer overnight but faded the move as the European morning proceeded. The initial gains came even as Intel slumped around 14% following the release of fourth quarter results after last night’s close. The chipmaker beat expectations for both earnings and revenues. But guidance for the current quarter disappointed.

There are no significant earnings updates due today, but the latest updates on Flash Services and Manufacturing PMIs come out later this afternoon. The S&P 500 hasn’t quite managed to fill the gap that opened up due to the selloff between last Friday’s close and the reopening on Sunday night. This leaves the index a touch vulnerable going into the final session prior to the weekend.

If buyers are prepared to have another bash at pushing the index up towards 7,000, then that will keep the bullish trend intact. But if equities show signs of weakness today, then this would increase the likelihood that the rally is running out of steam. If so, then a significant correction may be on the cards.

European stock indices had a relatively steady open this morning. But they began to turn lower after US stock index futures gave back overnight gains. The losses were relatively modest. But it’s worth noting that the European majors didn’t have the same upside vigour yesterday, compared with their US counterparts.

Source: TN Trader

Could this be an indication that the recent popularity of European equities is beginning to fade? Perhaps. But only if one believes that there’s a growing fear of over-exposure to equities more globally. After all, much of the attraction amongst investors for European markets has been their relative value when compared to those in the US. And that gap hasn’t been closed yet.

Nevertheless, President Trump’s threat of tariffs against eight European countries and NATO allies has disappeared. Or rather, the threat has been parked in The Donald’s top pocket, ready to be flourished the next time European leaders wind him up.

Ukraine’s President Zelenskyy delivered a sharp critique of Europe’s geopolitical stance, while Mr Trump’s comments on Iran, Greenland, and the expanding remit of his proposed “Board of Peace” kept political risk firmly in focus.

Despite that, business leaders at the WEF in Davos worked hard to sound upbeat and put on a united front. Although it was painfully apparent that corporate titans, particularly from the US, were desperate to curry favour with President Trump.

It has proved a mixed session for Forex so far this morning. The US dollar is effectively flat across a basket of currencies, although it has made gains versus the euro, while weakening against sterling. That means that the Dollar Index was flat early on, trading around an area of mild support near 98.00.

The British pound got a lift from some better-than-expected Retail Sales numbers, and a welcome uptick in both Services and Manufacturing PMIs.

In contrast, Flash Services and Manufacturing PMIs for the eurozone were very much a mixed bag. But the big mover overnight was the Japanese yen, which delivered sharp intraday moves.

USD/JPY briefly spiked above 159.00 before slumping below 157.50 ten minutes later. The move came on speculation that Japan’s authorities had checked rates, which often comes ahead of an intervention.

Source: TN Trader

Earlier on, the Bank of Japan (BOJ) kept interest rates unchanged as expected. But the BOJ’s forecasts had a hawkish tilt. This comes ahead of the snap election called by Prime Minister Sanae Takaichi for 8th February. This is a high-risk move by her. But if it plays out in her favour, then it will increase the probability of an expansionary fiscal policy, which should weigh on the yen.

Gold squeaked to a fresh record high overnight of $4,967 before pulling back. It continues to trade above $4,900 and appears to be consolidating after a powerful multi-session rally that has put the $5,000 level firmly on traders’ radar. Gold seems to be pausing rather than reversing. The US dollar has steadied, and this, added to easing geopolitical tension, appears to be capping the immediate upside.

Source: TN Trader

That said, the broader backdrop remains supportive. Expectations for at least two Fed cuts in 2026 continue to undermine the dollar, while concerns over US public finances, political pressure on the Fed, and lingering global risks keep gold well bid on dips.

Despite short-term overbought signals, the precious metal is on track for a strong weekly gain, and price action suggests pullbacks are being treated as opportunities rather than trend breaks. This is a high-risk trading environment.

As high-risk as gold may be, it has nothing on silver, which continues to outperform in the most extraordinary fashion. Silver soared over 6.5% yesterday after the briefest period of consolidation. And it went on to break above $99 per ounce this morning. This really looks like a market in the midst of a blow-off top, with talk of supply shortages and a massive short squeeze bringing in fresh buying momentum.

Source: TN Trader

There’s an awful lot of FOMO out there, and that has the potential to push prices up even further. But of course, the longer this rally extends, the greater the risk of being caught out on a weak limb. Silver looks toppy up here. But I’ve been saying that for ages now and have been repeatedly wrong.

Following yesterday’s selloff, crude prices rebounded in early trade this morning. Front-month WTI pushed back above $60 per barrel, giving the bulls more confidence that a bottom may finally be in. Technically, the chart does look more constructive from a bullish perspective.

Prices have managed to push up over the past fortnight. And while they may have lost some upside momentum, this period of consolidation has been a positive development. The daily MACD has picked up steadily since late October and is now comfortably back in positive territory, hitting its highest levels since June.

Source: TN Trader

These gains have come despite the expectation that fresh supply from Venezuela can only weigh on prices, given the ongoing market glut. Indeed, recent inventory data should undermine the bullish case for oil, with US stockpiles rising more than expected and reinforcing concerns around oversupply.

Yet price is everything. The next few weeks will reveal if the bears are ready to launch a renewed attack to drive prices to new cycle lows. Alternatively, there could be a change in trend if sellers switch to the buy-side.

Natural gas turned lower yesterday and continued to fall overnight following an explosive rally off the lows hit just over a week ago. But it didn’t take long for buyers to reappear, and gas was effectively unchanged soon after midday.

Yesterday’s selloff can be attributed to profit taking. But pressure remains to the upside as the US prepares itself for an Arctic blast, which is predicted to hit as many as thirty states and affect around two-thirds of the US population. US gas production has fallen over the last few years due to low prices.

At the same time, demand is set to increase at home due to energy requirements from AI data centres, and abroad as US exports replace Russian producers whose exports are subject to sanctions.

Bitcoin got off to another weak start on Friday, having failed repeatedly to break back and hold above $90,000. Ether was trading below $3,000 with momentum picking up to the downside.

This has been a disappointing two days for crypto bulls who could have reasonably expected both Bitcoin and Ether to have regained upward strength, given the rebound in global equities since Wednesday afternoon.

ETF demand has softened noticeably, and the marginal buyer is increasingly short-term and speculative. None of these factors alone is decisive, but together they suggest a market struggling to sustain upside without fresh catalysts.

The VIX is pretty much back where it ended last Friday, reflecting a market that remains relatively complacent, despite the selloff in equities earlier this week. The recovery since Wednesday afternoon indicates that investor risk appetite remains strong, yet volatility is not collapsing. This suggests that investors are still hedging against policy surprises, earnings risk, and geopolitical flare-ups.

With no significant earnings ahead of the weekend, attention shifts to global PMI data and the final day of the World Economic Forum in Davos. Next week marks a major inflection point, with Tesla, Apple, Amazon, and others set to report. Gold and silver remain headline acts, while oil continues to struggle for traction.

FX markets are subdued, crypto conviction is thinning, and volatility remains elevated enough to warrant respect. Tariff talk and geopolitics have cooled, but neither has disappeared. Beneath the surface, risk remains very much alive — even as the bulls continue to press their advantage and Dow 50,000 edges into view.