Asian-Pacific stock indices mixed

US stock index futures were mixed in early trade on Monday. But all the majors managed to bounce off lows hit as markets reopened after the long weekend. Equity and bond markets were closed on Friday, marking Juneteenth National Independence Day.

Source: TN Trader

Tech stocks were in demand this morning, with notable gains for Micron Technology (+3.2%), Super Micro Computer (+2.8%) and Intel (+4%). SpaceX was down 3.7% to trade around $178 per share. That’s well below the high hit this time last week, just a fraction below $230, but still represents a premium of 32% over its IPO price of $135. Investors are having to assess developments around US-Iran negotiations to end the war, which is well into its fourth month.

Over the weekend, Iran said it had closed the Strait of Hormuz due to Israeli military action in Lebanon. And yesterday, President Trump threatened to restart the war. But it sounds as if things are back on an even keel. Iran’s Foreign Minister, Abbas Araghchi, said that talks overnight with the US have delivered ‘major progress’, so investors will keep an eye on events as they unfold this week.

The first quarter earnings season is really winding down now. FedEx and Carnival report tomorrow, but watch out for Micron Technologies, which will release its latest update after Wednesday’s close. Wednesday also sees the results of the Fed’s annual banking ‘Stress Tests’, while Core PCE, which used to be the Fed’s preferred inflation measure, is released on Thursday.

Following last week's hawkish Federal Reserve meeting, the likelihood of further rate hikes this year has increased sharply. There is now an 89% probability of one or more rate hikes before year-end, with an 11% chance of ‘no change’. The CME’s FedWatch Tool says there’s no chance of a rate cut.

European stock indices put in a mixed performance this morning as investors weighed conflicting signals from US-Iran negotiations while monitoring political developments across the UK.

Sir Kier Starmer resigned as UK Prime Minister, a role he hasn’t enjoyed since he led the Labour Party to victory with a stunning majority just under two years ago. It looks as if Andy Burnham will succeed Sir Kier, but whether he faces a challenger or simply assumes the position unopposed is something which should become apparent over the next day or two.

The UK’s FTSE 100 was barely bothered. For a start, Mr Stramer’s move was widely telegraphed over the weekend, and secondly, investors have calculated that the current government has already done enough damage to the economy through tax hikes and regulation. Anyway, the big multinationals in the index make a significant chunk of their profits from overseas sales.

Source: TN Trader

The US dollar continued to outperform its major peers on rising expectations for further Federal Reserve tightening. The CME’s FedWatch Tool now puts the probability of at least one 25-basis point rate hike this year at 89%. There’s now just an 11% chance of ‘no change’ and no chance whatsoever of a rate cut. This shift follows last week's Federal Reserve hawkish monetary policy meeting, along with its ‘Dot Plot’ forecast.

Meanwhile, sterling rose against both the US dollar and the euro, following Sir Kier Starmer’s announcement that he was standing down as the UK’s Prime Minister. Sir Kier has held the role for just short of two years, having won a thumping majority at the General Election in early July 2024. It seems quite likely that Andy Burnham, former mayor of Manchester, will be anointed as PM without challenge.

He has said previously that he would stick to the current fiscal framework as laid down by the Chancellor of the Exchequer (for now), Rachel Reeves. But perhaps speculators should consider more seriously Mr Burham’s deep and concerning misunderstanding of the bond market.

Meanwhile, the USD/JPY rallied further this morning, briefly touching 161.80, its highest level since early July 2024. The Japanese yen remains under pressure despite recent intervention warnings from Japan's Ministry of Finance (MOF) and others. Earlier this morning, Finance Minister Satsuki Katayama once again emphasised that officials are prepared to respond to excessive currency movements.

With the USD/JPY now a full cent higher from where intervention began in late April, traders are still playing a game of chicken to see what level would finally trigger the yen buy orders. Of course, officials will want to make sure that any intervention they carry out now actually works. April’s intervention cost over $72.4 billion, and the yen is now weaker than it was back then.

Source: TN Trader

Eleven days ago, gold dropped towards $4,120 to hit its lowest level since November last year. It subsequently bounced, topping $4,380 on Wednesday evening before a more modest retreat. The precious metal recovered again this morning, suggesting that there is still some positive sentiment out there even after last week’s surge in the dollar following a more hawkish-than-expected Federal Reserve meeting.

Gold found further support this morning as oil prices retreated following reports that mediators Qatar and Pakistan had helped establish a 60-day roadmap aimed at securing a final peace agreement between the US and Iran. But gains remain limited.

Markets have now priced in a high probability that the Federal Reserve will raise interest rates by at least 25 basis points later this year, and this is weighing on gold prices for now. While further gains are possible, speculators remain on guard for a deeper pullback, which could lead to a test of support around $4,000.

Source: TN Trader

Oil prices gapped higher overnight on mixed reports about the outcome of peace negotiations between the US and Iran. Iran said it was closing the Strait of Hormuz as Israel continued to launch attacks on Hezbollah in Lebanon. President Trump then threatened to restart military action against Iranian targets. But the oil price then retreated this morning.

Source: TN Trader

Traders reacted to comments from Iran’s Foreign Minister Abbas Araghchi, who insisted that talks since Sunday had delivered ‘much progress’. Then there was confirmation from mediators Qatar and Pakistan that both sides had agreed on a roadmap for producing a comprehensive peace agreement within 60 days.

Bitcoin continues to trade in a relatively tight range, just south of $65,000. This time last week, it came within a tick of $67,300. But it subsequently sold off, dipping below $62,400 on Thursday evening. The daily MACD has picked up from relatively oversold levels and now suggests that upside momentum is picking up a touch. But that has not yet been reflected in Bitcoin’s price.

Speculators will be keeping a close eye on it this week to see if it can break above $65,000 again and then climb through $70,000. It slumped below here at the beginning of the month.

Investors enter the week facing a crucial combination of inflation data, central bank commentary and geopolitical headlines. Thursday’s PCE inflation report from the US has taken on greater significance following the Federal Reserve’s hawkish shift last week. Investors will also be monitoring speeches from Federal Reserve and European Central Bank officials for additional clues regarding policy direction.

Geopolitical developments remain a key market driver. While progress toward a final US-Iran agreement has improved sentiment, conflicting reports regarding the Strait of Hormuz highlight the fragile nature of the current ceasefire framework.

Elsewhere, UK Prime Minister Keir Starmer has resigned, although it appears that this will not lead to a protracted leadership contest to find a replacement. Meanwhile, China's latest trade restrictions on US companies add another layer of uncertainty to the global outlook.

For equity markets, technology remains firmly in focus. Investors continue to favour semiconductor and AI-related stocks, with companies such as Intel, Micron and SpaceX likely to remain at the centre of market attention. Micron gives its quarterly update after Wednesday’s close.

* The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance.