Asia Pacific markets extend losses

US stock index futures fell sharply overnight, pulling back after Monday’s recovery. The selling accelerated as Europe opened for business. Yesterday, US stock indices began the session under severe selling pressure but then recovered as the day progressed. This turnaround saw the NASDAQ and Russell 2000 add 0.4% and 0.9% respectively on the day, while the S&P 500 ended unchanged and the Dow slipped 0.2%.

This morning’s selloff is a tad deeper than yesterday's, and time will tell if this again turns out to be a ‘buy the dip’ opportunity. Tech and small caps have led this morning’s decline, with the NASDAQ down 2.5% and the Russell off 2.8%. The Dow was down 1.8% at the time of writing, while the S&P 500 had fallen 2% and had broken under yesterday’s low of 6,759.

Source: TN Trader

Yet still nothing has broken technically to the downside. The S&P will need to experience a significant and protracted break below 6,730, not just on the futures, but during the main market session as well, to suggest that the market may have topped.

Otherwise, the bulls will see another buying opportunity, and one that may eventually take out the high and resistance at 7,000. All this is irrespective of how the US-Israeli war against Iran proceeds, although it is adding to uncertainty.

It’s probably fair to say that the market consensus is that the bulk of the action will be over by the end of this month. Although what happens after that is anyone’s guess. But it’s worth bearing in mind that there were already concerns about US equity markets prior to this latest geopolitical upheaval. These included worries over AI in terms of negative effects on a host of services, return on investment, future unemployment and so on.

In fact, like yesterday, some of the heftiest individual stock losses this morning are across tech, semiconductors and ‘Mag 7’ stocks. Add in worries about private credit with last week’s bankruptcy of Market Financial Solutions, a reminder of last year’s First Brands/Tricolor blow-ups, and there’s still plenty to worry about, even without a war in the Middle East.

Investors are also bracing for key corporate earnings, including results from CrowdStrike and Target, with Broadcom and Costco due later in the week.

European stock indices fell sharply this morning. Two of the worst affected were the Euro Stoxx 50 and the German DAX. Both have dropped over 7% from their highs hit at the end of last week. This has taken them back down to levels last seen in early December for the DAX, and at the end of the year for the Euro Stoxx.

Source: TN Trader

It was difficult to find sectors in positive territory, aside from Defence and Energy. The risk-off mood had intensified after reports that two drones struck the US Embassy in Riyadh, according to Saudi Arabia’s defence ministry. This was a stark reminder that all the Gulf States are vulnerable to attack as Iran looks for targets for reprisals.

In other news, there was an unexpected uptick in Eurozone inflation, which saw Core CPI jump to 2.4% year-on-year from 2.2% previously. Not only is this above the European Central Bank’s (ECB) 2% inflation target, but it also follows on from two recent reports showing that US inflation is pushing in the wrong direction. This has serious implications for both the ECB and the US Federal Reserve.

The US dollar has built on yesterday’s sharp gains. The cash Dollar Index was edging above 99.00 mid-morning, hitting its best levels since mid-January. Back then, it proceeded to collapse to a multi-year low of 95.25, a fall of 3.8% in just ten days.

Source: TN Trader

While it has now taken over a month to recover those losses, the US dollar is looking in much better shape. This has persuaded dollar bulls that the low is now in for the greenback and that it may continue to make gains across the board.

Others may offer up some caution, suggesting that this is a special situation, given the outbreak of a war in the Middle East, and that the US dollar is only making gains due to safe-haven demand. However, the latest move is undoubtedly a big vote of confidence in the greenback, although the current rally may need to back up and fill in to avoid looking overstretched chart-wise.

Meanwhile, the British pound fell below 1.3300 against the dollar to hit its lowest level in exactly three months. Soaring oil prices fuelled concerns over rising UK inflation. Bank of England policymaker Alan Taylor noted it was too soon to assess the full impact of higher oil prices, though markets have sharply pared expectations of a March rate cut.

Gold slumped this morning. Prices broke back down below $5,200, taking gold back to levels last seen on Friday, ahead of the US-Israeli attack on Iran. Gold gapped higher on Sunday night on news of the outbreak of hostilities. But it was unable to hold onto early gains in the face of extraordinary dollar strength.  

Technically, gold is now retesting support/resistance around $5,150. If it manages to stabilise around here, then there may be an opportunity for some dip buying. But it does look vulnerable to further weakness, and if selling pressure continues to grow, then a pullback towards more significant support around $5,000 can’t be ruled out.

Source: TN Trader

Silver fell sharply yesterday, and it has added those losses in early trade this morning. On Sunday night, silver hit a four-week high just below $96.50. It tried to build on these gains early yesterday morning. But it then ran out of upside momentum, and since then, it has collapsed.

At the time of writing, silver had dropped below $78 per ounce, registering a loss of 19% since Sunday night. Prices could go either way from here. But it’s probably fair to say that this is a very dangerous market, and one best avoided for now.

Source: TN Trader

Crude oil prices extended gains after a senior official of Iran’s Islamic Revolutionary Guard Corps announced that the Strait of Hormuz was closed. Close to a third of global seaborne crude exports must pass through the Straits, as does a significant percentage of natural gas. Most of the latter comes from Qatar. And yesterday QatarEnergy shut down production after it came under attack from Iranian drones.

Iran had also launched attacks on Saudi Arabia’s Ras Tanura oil refinery. Oil tankers are now bunched up at either end of the Strait of Hormuz as Iran has threatened to fire on anything that attempts to pass through. Shipping costs, both tanker hire and insurance, where available, have soared.

Crude oil gapped up on Sunday night. This saw front-month WTI trade at $74.70 per barrel, up from Friday’s close of $67.25. Prices pulled back yesterday, but have soared again today with WTI topping $77, to hit its highest level since June. With the US and Israel continuing to diminish Iran’s ability to fight back, the Strait of Hormuz must be a significant target.

Source: TN Trader

If they can push back against the Revolutionary Guard here and get the Strait reopened, that should release some of the upside pressure on oil. The next issue is guaranteeing the safety of tankers passing through the Strait.

Bitcoin hovered above $66,000 this morning, having pushed briefly above $70,000 yesterday afternoon. Bitcoin and Ether have demonstrated some resilience over the past four days, with both able to make gains even as the US and Israel launched their attack on Iran on Saturday.

Both continue to move sideways in a consolidation pattern that has seen Bitcoin hold support at $60,000 while still bashing up against resistance at $70,000. The daily MACDs for both cryptos are looking quite constructive from a bullish perspective, having curled up from oversold levels. But Bitcoin must break above $70,000 in a convincing fashion to really get the buyers back on board.

Earlier today, the March VIX pushed above 23.00, hitting its highest level since November last year. This signalled heightened investor vigilance as the Middle East conflict shows signs of widening. Markets remain sensitive to headlines, with oil prices, central bank expectations and geopolitical developments dictating short-term direction.

The recent ISM data in the US was broadly encouraging on headline activity, but raised concerns about inflation through the surge in Prices Paid. Upcoming earnings from CrowdStrike, Target and Broadcom will test corporate resilience in a volatile macro environment.

President Trump has stated that operations in Iran are progressing well, while tensions with the UK have reportedly surfaced over Prime Minister Keir Starmer’s questioning of US tactics. Oil and gas stocks have surged for clear reasons, but precious metals have turned lower as the US dollar pushes higher.

For now, geopolitical developments remain the dominant force. If the conflict continues to expand, this episode may have more lasting legs than markets initially anticipated.