Asian-Pacific indices end mixed

Both the S&P 500 and NASDAQ closed at new all-time highs last night, with the latter having the best of the session, adding an impressive 1.2% while the former tacked on 0.6%. The Dow slipped 0.1% while the small-cap Russell 2000 ended unchanged. US stock index futures were firmer across the board in early trade this morning, although there was some evidence of mild profit-taking across semiconductor stocks.

Despite this, semiconductors remain at the forefront of the rally since the end of March. This has been spectacular, with triple-digit percentage gains for certain corporations. These include Micron Technologies, which is up around 150%, while AMD and Intel have added 127% and 200%, respectively.

The tech-heavy NASDAQ is up over 28% over the same period. After last night’s close, Cisco Systems surged 22% after the company reported stronger-than-expected third-quarter results, along with upbeat forward guidance, while announcing plans to cut around 4,000 jobs. Textbook CEOing.

Yet these record market moves come against an uncertain background, both geopolitically and economically. There is no indication that the war between the US and Iran could end anytime soon, with even the prospect of restarting peace negotiations looking bleak.

Meanwhile, the Strait of Hormuz remains closed and effectively controlled by Iran. At the same time, the US Naval blockade of Iranian ports in the region appears to be exerting additional economic pressure on Tehran. Economically, there has been an unwelcome jump in US inflation.

This week’s updates on CPI and PPI came in hotter-than-expected. Yesterday’s Core PPI, a measure of wholesale inflation that excludes food and energy, shot up to 5.2% year-on-year, well above the prior month’s reading of 4.0%, as well as the consensus expectation of 4.3%.

This does not bode well for Core PCE, generally seen as the Fed’s preferred inflation measure. This will also complicate matters for incoming Fed Chair Kevin Warsh. Not only does he take up the position when the FOMC is more divided than at any time since 1992, but he will also be under pressure from President Trump to cut rates as inflation spikes, the labour market is stable and economic growth is relatively robust. Retail Sales are released later this afternoon.

Chart-wise, both the NASDAQ and S&P appear to be experiencing a melt-up. Could this prove to be a blow-off top like those seen in precious metals at the end of January, or will there be an orderly end to the rally? There certainly seems to be a stack of FOMO out there. But relatively little ‘Fear that One Day All this Will End Horribly’, or FODAWEH, as, no doubt, it will soon be referred to.

Source: TN Trader

There was a strong start for European stock index futures on Thursday. All the major European exchanges were closed for Ascension Day. But investors responded to fresh all-time highs for both the NASDAQ and S&P 500 last night, and to gains across US stock index futures made this morning. Investors were keeping an eye on political developments in the United Kingdom and the Trump-Xi summit in Beijing.

Source: TN Trader

Yesterday, reports suggested that the UK’s Prime Minister, Keir Starmer, was still in danger of a leadership challenge. Health Secretary Wes Streeting is the prime suspect, although there’s speculation this morning that ex-cabinet minister Angela Rayner is also on manoeuvres, having settled her tax bill.  

Meanwhile, in Beijing, Presidents Trump and Xi Jinping held their first bilateral meeting. Mr Trump described the discussions as “great” and said the relationship between the two countries would be “better than ever before.”

So far, there have been no direct announcements related to trade, artificial intelligence, rare earth exports and the ongoing Middle East conflict. But Xi Jinping warned President Trump that the US and China could ‘come into conflict’ should the issue of Taiwan be mishandled.

FX markets were relatively quiet this morning, with much of Europe shut for Ascension Day. The US dollar managed to hold on to recent gains, having rallied this week as the war between the US and Iran shows no sign of ending anytime soon, and as US inflation spiked higher in April. The cash Dollar Index hit a two-week high yesterday at 98.35.

Meanwhile, support held last week between 97.30 and 97.50. It seems likely that the dollar could retest support again on any sign that the US and Iran were ready to resume peace negotiations.

However, the downside may be limited given the jump in both Consumer Price and Producer Price inflation in April, even when direct food and energy costs are excluded. According to the CME FedWatch tool, this has reduced the likelihood of a rate cut this year to 2% from 28% a month ago.

Meanwhile, the probability of a 25-basis point rate hike has jumped to 28% from less than 1% this time last month. There’s currently a 66% chance that rates stay unchanged in 2026.

Sterling has come under pressure against the US Dollar despite some better-than-expected UK economic data this morning. Preliminary UK GDP data showed the economy expanded by 0.6% in the first quarter, matching expectations and improving from 0.2% growth in the previous quarter. March GDP growth also surprised positively, rising 0.3% compared to expectations for a 0.2% contraction.

Source: TN Trader

Manufacturing production rebounded strongly with a 1.2% increase in March following a contraction in February, while services activity also improved.

Despite the encouraging data, political instability in the UK continued to weigh on investor sentiment. Concerns surrounding Prime Minister Keir Starmer’s effectiveness and fears of a potential Labour Party leadership battle have led to a sharp increase in borrowing costs as Gilt yields soared.

Gold traded modestly higher on Thursday but struggled to hold above $4,700. It rallied sharply off the month-long low of $4,500 hit earlier this month. But, having risen to $4,773 on Tuesday, it then pulled back and has failed to regain its upside momentum.

Source: TN Trader

It has certainly underperformed silver, which has steadily trended higher over the last couple of months. Gold has reacted negatively to gains in the dollar. These have come on rising tensions between the US and Iran, with fears that the ceasefire could easily break down at any time.

The dollar has also been in demand due to a spike in US inflation, which has reduced the likelihood of rate cuts this year, while increasing the probability of a rate hike.   

Silver hit a nine-week high yesterday, pushing above $89 per ounce, but was unable to sustain a move above $90. It pulled back a touch this morning in what looks like some mild profit-taking following a 26% bounce since the end of April.

Source: TN Trader

Silver does seem to be back in favour, and it has certainly outperformed gold recently. But traders are aware that expectations for US interest rate cuts this year have evaporated.

According to the CME FedWatch Tool, the probability of a 25-basis point rate cut this year is a little over 2%. Meanwhile, the likelihood of a rate hike is up to 28%. This could prove to be a headwind for further gains, particularly if rate hike expectations rise further.

Crude oil prices were a touch weaker in early trade on Thursday. There were few details released concerning President Trump’s meeting with President Xi Jinping in Beijing, other than the former insisting it was ‘great’.

Source: TN Trader

At the same time, Xi Jinping warned that the US and China could ‘come into conflict’ should the issue of Taiwan be mishandled. Meanwhile, the fragile ceasefire between the US and Iran continues to hold, and the Strait of Hormuz remains closed and controlled by Tehran.

Yesterday, the International Energy Agency said that the closure had led to one of the largest supply shocks in history. It also warned that mounting supply losses from the Strait of Hormuz are rapidly depleting global oil inventories.

Meanwhile, OPEC also revised down its oil demand growth forecast for the rest of this year. It also noted that production has fallen sharply since the start of the Iran conflict.

Investors remain focused on several key themes that are expected to influence markets in the coming sessions. The Trump-Xi summit in Beijing remains the dominant geopolitical event of the week, with traders closely listening for any announcements related to trade, tariffs, artificial intelligence, Taiwan and the Middle East conflict.

Inflation also remains a major concern after both US CPI and PPI data came in hotter than expected, increasing expectations that the Federal Reserve could keep interest rates unchanged for longer or even consider additional tightening. Elevated energy costs continue to raise concerns about inflation and global growth.

In Europe, political uncertainty in the UK remains another key risk factor as pressure continues to build on Prime Minister Keir Starmer. Meanwhile, technology and artificial intelligence stocks continue to dominate investor attention, with Nvidia, Cisco and semiconductor companies leading the latest market rally.