Asian-Pacific stock indices mostly firmer

US stock index futures were mixed, but little changed, in early trade this morning. As with other financial markets, investors appear to be happy to sit on their hands ahead of tonight’s monetary policy announcement from the Federal Reserve’s FOMC, and as four constituents of the ‘Magnificent Seven’ prepare to release their latest earnings updates after the close.

Source: TN Trader

Considering the Fed first: This will be Jerome Powell’s last monetary policy meeting before he steps down as Chair. He is expected to be replaced by President Trump’s preferred choice, Kevin Warsh, who looks likely to be approved by the Senate.

Markets are not expecting any change in interest rates tonight, but will be paying close attention to the Fed’s statement and how it may differ from the previous update, as well as Jerome Powell’s final press conference as Chair. The key issue here is hearing the Fed’s view on the war, as it relates to high oil prices, and thereby their outlook for inflation for the rest of the year.

Could the FOMC indicate that rates could be raised this year? According to the CME’s FedWatch Tool, the probability of no change in rates in 2026 now stands at 78%, so any hawkishness could throw a spanner in the works as far as risk appetite is concerned.

There’s also the question over whether Mr Powell will stay on at the Fed, thereby irking President Trump, or decide to call it a day. But that may be an issue for another day.

All the US majors lost ground yesterday. The small-cap Russell 2000 led the decline, ending down 1.2%, while the tech-heavy NASDAQ dropped 0.9%. There was a sharp pullback across semiconductor stocks following an incredible bull run. But technology stocks tied to AI also took a hit following concerns that privately-owned OpenAI was losing market share.

New user growth and sales were below the company’s targets. OpenAI’s CFO, Sarah Friar, warned that the company may struggle to meet computing contract obligations if top-line growth does not accelerate.

After last night's close, Starbucks jumped over 5% after raising its full-year outlook. But Robinhood dropped 10% on disappointing numbers. Chip sector names Seagate Technology and NXP Semiconductors were up 17% and 15%, respectively, following earnings beats and strong guidance.

All eyes will now focus on results from Alphabet, Amazon, Meta Platforms and Microsoft due after tonight’s close. Forward guidance will be key here, and analysts will be looking for confirmation that AI-related spending is translating into revenue.

European stock indices drifted lower in early trade on Wednesday. Yet again, it’s hard to dismiss recent evidence which suggests that investors are wary of taking on additional long-side exposure to European and UK equities. This morning’s selloff comes despite a clutch of strong results from some of Europe’s biggest banks.

Source: TN Trader

There were positive surprises from Lloyds Banking Group, UBS, Deutsche Bank and Santander. But Deutsche shares dropped 2.1% as it announced a higher-than-expected credit loss provision. Lloyds also came under pressure as it raised concerns of the ‘stagflationary consequences’ of events, including the war between the US and Iran.

Trading across FX was subdued this morning as investors await the latest deliberations on monetary policy from the Federal Reserve’s FOMC. These will be released later this evening and then followed by a press conference hosted by departing Fed Chair Jerome Powell.

Source: TN Trader

The FOMC is expected to keep rates unchanged. But analysts will be parsing the accompanying statement for any changes from the last meeting, which may provide an insight into the FOMC’s expectations for future monetary policy.

Key to this will be their thoughts on inflation, particularly with reference to the elevated price of crude oil due to the war between the US and Iran. The cash Dollar Index was steady in early trade this morning and holding on around 98.50.

Gold was down again overnight, having recovered from its lows yesterday afternoon. Prices appear to be stuck in a narrow range, as they top off around $4,600 yet find support around $4,550. Gold remains negatively correlated to the US dollar, so any strength in the greenback weighs on gold, and vice versa.

Ten days ago, the precious metal was making steady upside progress, holding comfortably above $4,800 as the bulls had $5,000 in their sights. But the past week or so has seen a shift in sentiment, as sellers emerge after any significant pop higher.

The daily MACD continues to curl lower off the neutral level, suggesting a loss in upside momentum for now. Gold traders are keeping a close eye on the US dollar as the Fed’s monetary policy meeting concludes this evening.

Source: TN Trader

Silver has also experienced a drop off in upside momentum, which is consistent with its own daily MACD pulling back from the neutral line. Twelve days ago, silver briefly broke back over $83 per ounce.

But yesterday afternoon it came within a few cents of $72, registering a 13% decline. It has managed to recover some of those losses this morning, but the upside has been capped by recent US dollar strength. All eyes are now on tonight’s monetary policy statement from the US Federal Reserve.

Source: TN Trader

Front-month oil prices have flown higher yet again this morning. The June Brent crude contract hit its highest level since the summer of 2022, just a few months after the Russian invasion of Ukraine. June WTI was just a few dollars short of its recent high hit on 8th March, one week after the US launched its attack on Iran.

Source: TN Trader

Investors are responding to the lack of progress in bringing the US/Iran war to a conclusion. A fragile ceasefire continues to hold, but the Strait of Hormuz remains closed and under Tehran’s control, despite the US blockade of Iranian ports in the region.

The backwardation in Brent forward contracts has deepened. This is an expression of the tightness in supply for immediate/ near-term delivery compared to later this year, when traders expect the pressure to dissipate due to the war ending.

Adding to this is the news that the UAE has announced its intention to leave OPEC/OPEC+ in a few days' time. This will remove constraints on the country’s oil production, which should add to global supply later this year. The war has proved devastating for the UAE’s economy, and it is understood that it has approached the US to establish a US dollar swap line to help ease liquidity pressures.

Bitcoin was firmer in overnight trade, making back most of Tuesday’s losses. It has spent the past week consolidating, albeit with a slight negative bias. But it remains within striking distance of key resistance at $80,000. Positive sentiment has been building this month, and investors have been encouraged by Bitcoin’s subdued volatility over the past couple of months, given the ongoing geopolitical uncertainty.

This week’s consolidation has seen the daily MACD start to curl downwards, suggesting a drop in upside momentum. The big question now is whether there will be a bigger pullback or if Bitcoin can build enough energy to break and hold above $80,000.

Stock market volatility has eased, but investors remain cautious ahead of some potential market-moving catalysts. The Federal Reserve monetary policy announcement is the central focus, with the FOMC expected to hold rates steady, making forward guidance critical.

The UAE’s exit from OPEC could signal further fragmentation within the group, while oil above $100 continues to pose inflation risks. President Trump remains dissatisfied with Iran’s latest proposal, meaning there’s greater uncertainty around the next geopolitical step.

Concerns are also emerging elsewhere. A warning from a JPMorgan executive about a potential bond market crisis highlights risks tied to rising global debt, while comments from executives at OpenAI have temporarily cooled enthusiasm in the chip sector. Airlines are also under pressure, with Ryanair warning that European carriers may struggle if jet fuel prices remain elevated.