Japan’s Nikkei up again

US stock indices closed a tad lower last night, as a touch of profit-taking emerged following a strong run for equities. The Dow led the decline and ended the session down 0.8% as financials came under pressure. JP Morgan fell more than 4% after it reported fourth-quarter results.

The banking giant handily beat expectations for both earnings and revenues, but investment banking fees disappointed. This saw investors trim their exposure to other big banks as well, ahead of today’s earnings updates from Bank of America, Wells Fargo and Citigroup.

The S&P’s Financial Sector was the worst performer yesterday, dropping 1.9%, while Energy outperformed, rising 1.5% as crude oil continued to rally, adding over 2% at one stage. This followed President Trump’s cancellation of meetings with Iranian officials, along with his comments expressing support for protesters of the regime.

Source: TN Trader

Mr Trump upped the ante overnight, warning the Iranian regime that there will be repercussions should it carry out death sentences on arrested protestors. What form these repercussions may take is far from clear.

While Energy proved a bright spot for US equities, the broader tone suggested that investors were becoming increasingly concerned over recent domestic policy moves, particularly the apparent threat to the Federal Reserve’s independence, as well as growing US involvement internationally.

US stock index futures were little changed overnight, but modestly lower overall. In addition to bank earnings reports before the US open, today also sees the latest update on wholesale inflation in the form of PPI (Producer Price Index) for November.

Unfortunately, this data series is still playing catch-up following the government shutdown in October. Consequently, it may not have much impact as the numbers are obviously out of date. Yesterday’s CPI (for December) was unchanged from the previous month and in line with expectations. It still looks as if it could take a few more months before the distortion effects of the shutdown fully disappear. But overall, investors were relieved that inflation didn’t tick higher.

Investors continue to price in the likelihood of two 25 basis point rate cuts this year, with the first unlikely to come before the Fed’s June meeting. President Trump has continued his personal attacks on Fed Chair Jerome Powell, saying that he is either ‘crooked’ or ‘incompetent’, while the Department of Justice pursues its criminal investigation into the central bank leader.

While senior central bankers, past and present, have rallied round and expressed support for Mr Powell, it is also fair to say that he does owe US taxpayers an explanation for the Federal Reserve refurbishment overspend. He should also explain why the answers he gave before Congress back in the summer don’t tally with the original refurbishment plans.

The German DAX was a smidge lower in early trade on Wednesday, pulling back a touch more from yesterday’s all-time intra-day high of 25,510. But aside from this, all the other major European stock indices, along with the UK’s FTSE 100, were not only firmer this morning, but, at the time of writing, at or near their own respective record highs. This comes despite the modest pullback across US indices and is further evidence that investors remain fully committed to equity ownership.

Source: TN Trader

It also shows that investors are prepared to look beyond the obvious trades and keen to get exposure to ‘undervalued’ and overlooked corners of the global stock market. This is despite the somewhat unsettling geopolitical developments, which, thanks to the Trump administration, are many and varied.

Today, attention centres on talks between US, Danish and Greenlandic officials, after President Trump reiterated his administration’s interest in acquiring the mineral-rich Arctic island, over which regional leaders have pushed back firmly.

Given the current unrest in Iran, recent events in Venezuela, ongoing tensions concerning Greenland, not to mention the war between Russia and Ukraine, it’s no surprise that defence stocks remain a bright spot, with expectations of a prolonged spending cycle supporting valuations.

Meanwhile, European energy stocks lagged, extending losses after speculation that US firms could gain access to Venezuelan oil. BP, Shell and Equinor all traded lower, while BP also flagged the potential for a multi-billion-dollar impairment charge tied to gas and low-carbon assets.

The US dollar was weaker across the board this morning, giving back some of its gains made yesterday. The euro and British pound were both major beneficiaries of the dollar’s pullback, as was the Japanese yen.

The yen managed to stabilise this morning following yesterday’s sharp drop, which continued into the early part of Asian Pacific trade overnight. This saw the USD/JPY trade up to 159.45, marking the lowest level for the yen since July 2024, when the USD/JPY hit 162.00, a 38-year high.

Source: TN Trader

This latest bout of yen weakness comes on growing speculation that Prime Minister Sanae Takaichi may take advantage of her current popularity to call a snap election. If so, and if it were to raise her party’s position, it should embolden her to carry through with increased fiscal stimulus to boost growth.

It may also increase pressure on the Bank of Japan to hold off on future rate hikes. However, Japan’s policymakers are wary of the weakening yen. While it certainly helps the country’s exporters, it also increases the cost of imports, particularly energy, given Japan’s dependence on external sources.

Traders should listen out for verbal intervention from Japanese policymakers. But physical intervention to support the yen is also possible should the currency head back towards the lows from July 2024.

After a brief pause yesterday, gold resumed its remarkable rally overnight. It pushed above $4,600, gaining 1% to trade above $4,630 and notch yet another fresh record high. Gold has rallied steadily since the beginning of this year, although it took the best part of a fortnight for it to recoup the losses made between Christmas and New Year.

Nevertheless, the daily MACD is largely supportive of the current bullish run, as it indicates increased upside momentum while not particularly overbought. Many traders remain convinced that gold is heading for $5,000 or more. They cite geopolitical uncertainty, central bank purchases, dollar weakness and the prospect of US rate cuts among the reasons why gold should continue to see strong demand.

But it is worth looking at the chart and noting the two significant pullbacks in the last three months. Traders should approach with caution.

Source: TN Trader

That warning for gold goes for silver, times ten. Silver has continued to outperform gold as it surged above $90 overnight, adding to the series of explosive upside moves since Friday. Silver was undoubtedly one of the strongest performers of 2025, driven by all the positive factors behind gold’s rally, plus a few extra ones particular to silver. These include its widespread industrial uses and concerns over a serious supply shortage.  

But investors can get carried away, and the current rally looks as if it is turning into a ‘blow off’ top. That’s not to say it can’t rally further. But silver is no longer cheap. It’s also worth noting that the gold: silver ratio (which measures the relative value of the two metals) now stands at 51, down from 90 at the beginning of last year. Silver is no longer seriously undervalued compared to gold, suggesting that something may eventually give.

Source: TN Trader

Oil prices were initially weaker in early trade this morning. This saw front-month WTI pull back after testing resistance around the $61.30 area. This followed a powerful four-day rally, which has turned out to be the strongest in six months. But as the morning progressed, resistance failed to hold. This led to a rush of short covering, which pushed prices up to their highest levels since late October.

Source: TN Trader

Could this be a bullish breakout after a six-month downtrend? It does look possible, although traders will get a clearer idea over the likelihood of a longer-term trend reversal after they study the shape and extent of the next decline.  

Reports that Venezuela has begun reversing production cuts and resumed exports raised concerns about increased global supply, with two super tankers already leaving port.

Inventory data should also have weighed on prices after data from the American Petroleum Institute (API) showed a larger-than-expected build in US crude stocks. But these were outweighed by the ongoing geopolitical risk surrounding Iran, where President Trump’s rhetoric and cancelled diplomatic engagements continue to worry traders.

Natural gas was unchanged overnight but then lost ground as the European morning progressed.  Despite this, gas prices continue to hold within a relatively narrow range. With limited fresh catalysts and volatility compressed, price action remains choppy but contained, suggesting the market is consolidating while waiting for a clearer directional driver.

Bitcoin and Ether surged after the latest US inflation update came in as expected. In addition, political uncertainty around the Federal Reserve reignited demand for non-sovereign assets.

Bitcoin jumped more than 4%, breaking back above $95,000, while Ether outperformed with gains of over 7%. Steady inflation reduced pressure on US Treasury yields and improved liquidity conditions, a supportive backdrop for risk assets. Added to that, concerns about central bank independence weakened the dollar, further boosting crypto appeal.

The VIX has picked up sharply over the last two days, even as the S&P continues to trade near all-time highs. The late-session equity sell-off helped volatility rebound, though levels remain historically subdued, underscoring continued underlying confidence despite recent pullbacks.

Gold and silverUS Retail Sales and PPI top today’s data calendar while earnings from Citigroup, Wells Fargo and Bank of America also feature. Markets remain alert to political developments, with President Trump continuing to pressure the Fed and signal shifts in trade and financial policy.

The Japanese yen weakness remains a focal point in FX, while gold and silver surged to fresh record highs. Crude oil may be breaking out of a six-month downtrend. Traders appear cautious but far from defensive — watching closely to see whether recent pullbacks offer opportunity or signal a broader shift.