Asia-Pacific markets end mixed

US stock index futures drifted lower in early trade on Friday after all the majors extended their weekly losses during Thursday’s session. The Dow and the Russell 2000 led yesterday’s decline, registering falls of 1.6% and 1.9%, respectively. The S&P 500 lost 0.6% while the tech-heavy NASDAQ got off relatively lightly with a drop of 0.3%.

Source: TN Trader

Investors reduced their exposure to US equities as they consider the uncertainty created by the ongoing hostilities across the Middle East. The Trump administration has not yet revealed the key objectives of its attacks on Iran, which means there is a lack of clarity over how long the hostilities could continue.

Meanwhile, the Strait of Hormuz remains blocked to seaborne traffic, despite naval efforts and US assurances to the contrary. This has contributed to ongoing upside pricing pressure across energy markets.

Overnight, WTI joined Brent in trading above $80 per barrel, with both contracts now at eight-month highs. Traders are keeping a close eye on oil prices, and fluctuations here seem to be driving price action in early futures trade.

But attention will shift to some key economic data releases ahead of the US open. There’s the latest Nonfarm Payroll update later this afternoon. The consensus forecast is for a payroll increase of 60,000 in February, which, if so, would be a drop from the prior reading of 130,000.

There have been concerns over rising unemployment across the US, a situation which could already be exacerbated by the increasing adoption of AI. This is the major factor cited by the doves when they argue for further rate cuts. But recent inflation data has been pushing in the opposite direction, with several Fed members wondering aloud if the next move should be a rate hike rather than a cut.

Overall, the market forecast for two 25-basis point rate cuts in 2026 has been dialled back quite sharply since the beginning of the year. This is weighing on equity prices, on top of concerns over AI, private credit and the war against Iran.

European stock indices were mixed in early trade on Friday. All the major regional indices pulled back from their best levels as the morning progressed, as oil prices pushed up to eight-month highs. This has proved to be a turbulent week for European markets, with investors rattled by the US-Israeli attack on Iran, along with the latter’s somewhat geographically random retaliation.

This time last week, the UK’s FTSE 100 hit an all-time high just below 11,000. But by yesterday evening, it was down over 5% from there, although it has managed to stabilise this morning.

Source: TN Trader

The US dollar was firmer across the board this morning. Once again, the cash Dollar Index was retesting resistance around 99.00, as investors are, once again, looking to the greenback as a safety play. Technically, 100.00 on the cash Dollar Index is a much more significant level of resistance. It was tested repeatedly back in November and held on every assault.

Eventually, the bulls gave up as upside momentum faded, and the Dollar Index went on to drop to a four-year low at the end of January this year. Some traders expected the decline to continue as speculation built that the US dollar was on its way to losing its status as the world’s reserve currency.

Source: TN Trader

But it looks as if calls for its demise were somewhat premature, although, as noted, the Dollar Index still has some important resistance levels to break. The war involving the United States, Israel and Iran entered its seventh day.

Yesterday, Iran launched missiles and drones across the Gulf, including a strike on an oil refinery in Bahrain. Israel continued airstrikes on Tehran, and the United States suspended operations at its embassy in Kuwait. The Strait of Hormuz remains closed, and crude oil is at an eight-month high.

Traders await the release of February’s US Nonfarm Payrolls report. Expectations point to job growth of around 60,000, which would represent a sharp drop from January’s 130,000 gain. The unemployment rate is expected to hold steady at 4.3%.

The labour market data could significantly influence expectations for Federal Reserve policy. Traders have already scaled back expectations for near-term rate cuts. The CME FedWatch Tool suggests that the next rate cut won’t come until September, rather than June as anticipated at the beginning of this year.

After a strong start in Asian Pacific trade, gold prices have pulled back steadily from their best levels, dropping below $5,100 by late morning in Europe. Gold began the week above $5,400. It got an unexpected boost over the weekend as investors reacted to news of the joint US-Israeli attack on Iran. But a sharp rally in the US dollar triggered a reversal.

It dropped the best part of 8% in little over a day and briefly broke below $5,000. Since then, it has recovered. But so far, it has been unable to break and hold above $5,200, and its upside momentum has faded a touch. It needs to break back above here convincingly to reinvigorate the bulls. Otherwise, a break of support at $5,000 could lead to a much deeper pullback.

Source: TN Trader

Silver has moved sideways since Tuesday afternoon. Its range, exempt a few brief breakouts, has been confined to $81 at the bottom and $85 at the top. This represents quite a calm few days for what is a notoriously volatile metal. This market behaviour could presage a significant move soon. Unfortunately, it’s difficult to predict in which direction that may be.

Source: TN Trader

Crude oil prices shot up again overnight, taking both Brent and WTI to eight-month highs. This is the sixth successive day of gains for oil, and the move has seen front-month WTI tack on 25% since last Friday’s close, and 46% since the beginning of this year.

In some respects, given the ongoing hostilities across the Middle East, it’s perhaps surprising that crude hasn’t topped $100 per barrel, as it did four years ago after Russia’s second invasion of Ukraine.

Source: TN Trader

After all, neither Israel nor the Trump administration have spelled out the aims of the war, so it’s difficult to calculate how long it may last. As things stand, investors seem to accept that it will take longer than last June’s ‘12-day war’ but also expect it to be over before the end of this month.

In the meantime, the Strait of Hormuz remains blocked (despite US assurances to the contrary), and this is cutting off the passage of around 20% of the world’s oil and gas. Until this is resolved, and considering that Iran may have mined the Strait, it seems likely that crude prices will include a hefty ‘war premium’.

Should the Strait reopen and be deemed safe for shipping, then oil prices should fall back quickly. Otherwise, expect oil prices to remain elevated with all the inflationary implications to consider.

On Wednesday, Bitcoin and Ether both traded at four-week highs of $74,000 and $2,200, respectively. Since then, they have slipped back modestly, although Bitcoin remains above prior resistance, now support, at $70,000, while Ether continues to trade north of $2,000. Institutional demand continues to keep a floor under prices, but that may get tested over the next few days.

Yet US spot Bitcoin exchange-traded funds have attracted significant inflows in recent weeks, including more than $460 million in a single day, suggesting a pick-up in demand from large investors. However, near-term volatility could remain elevated, and the broader geopolitical environment plays a key factor.

A prolonged Middle East conflict could push energy prices up further, feeding through to inflation, which would put upside pressure on global interest rates. This has the potential to weigh on risk assets such as cryptocurrencies.

Market volatility remains elevated despite signs of stabilisation across several asset classes. The March VIX was comfortably above 24.00 in early trade this morning, reflecting continued caution amongst investors as the S&P 500 once again broke below 6,800.

The elevated reading underscores the degree of uncertainty still present in global markets, particularly as geopolitical developments continue to drive headline risk. Sentiment remains fragile as traders assess the potential economic fallout from the conflict in the Middle East.

Markets now turn their attention to a busy economic calendar, with February’s Non-Farm Payroll report and Retail Sales figures expected to provide fresh insight into the strength of the US economy. Economists estimate that around 60,000 jobs were added last month, a notable slowdown from January’s 130,000 increase, though the unemployment rate is expected to remain steady near 4.3%.

Geopolitical developments remain the dominant driver of market sentiment as the United States and Israel continue their assault on Iran for the seventh day. Oil prices continue to climb as supply risks intensify, while the US Dollar remains firm.