Asia Pacific markets plunge

US stock index futures were sharply lower overnight but turned higher as Wednesday’s European session progressed. Yesterday, all the US majors closed in negative territory. But, in a similar fashion to Monday’s trading, all closed significantly above the day’s lows. The Dow and S&P 500 ended off 0.8% and 0.9%, respectively, while the NASDAQ dropped 1.0%. The small cap Russell 2000 fared worse, closing down 1.8%.

Source: TN Trader

In one major respect, at least from a technical standpoint, yesterday’s session differed from Monday’s. On Monday, all the major US stock index futures sold off in early trade but had recovered before the US open. So, the morning lows weren’t repeated during the main session. This meant that the bulls remained the dominant force.

Yesterday, the early selloff across US stock index futures was maintained into the main session, and this saw the S&P break under this year’s low. This was an ominous sign, suggestive of further weakness to come. There were plenty of concerns over US equities before the US-Israeli attack on Iran, including worries over AI and private credit.

Yet once again, dip buyers emerged to save the day as they have this morning. Could this be enough to drive US equities back up to all-time highs? Stranger things have happened. But as things stand, the S&P hasn’t quite managed to push back above 6,850. So, let’s see what happens.

In the meantime, investors continue to grapple with the inflationary implications of surging oil prices. Iran has managed to block traffic through the Strait of Hormuz, one of the world’s most critical energy chokepoints.

President Donald Trump said the US would provide risk insurance and potentially naval escorts for tankers navigating the Persian Gulf to restore crude flows. But can he do enough this week to calm nerves?

Today sees the release of the ADP private payrolls report, ahead of Friday’s official Non-Farm Payrolls. On the corporate front, earnings from Abercrombie & Fitch, Broadcom and Okta are also in focus.

European stock indices were firmer across the board in early trade on Wednesday. Investors were cheered by a rally in US stock index futures, which were helped along by a pullback in the oil price. The US dollar had also retreated from the high hit yesterday. Following a shaky start, investors reassessed the state of play as they monitored developments across the Middle East.

Source: TN Trader

Oil is arguably the most useful barometer of sentiment currently, given that it plays such a fundamental role in all aspects of the global economy and that it feeds directly into inflation.

The Strait of Hormuz may have been blocked by Iran’s Islamic Revolutionary Guard Corps, but President Trump has vowed to help with the cost of shipping insurance and may provide naval support to tankers passing through this vital chokehold, if necessary (?).

If there is evidence that shipping can get through the Strait safely by the weekend, that should play a major part in reducing tensions all around.

The US dollar fell against all the majors this morning, taking a breather following its surge over the previous two trading sessions. Yesterday afternoon, the cash Dollar Index broke above 99.00 to hit its highest level in three months. It subsequently pulled back but jumped again overnight to retest 99.00 as resistance before drifting lower.

Source: TN Trader

The dollar rally has come as investors once again turn to it as the ultimate safe haven, and on fading expectations of imminent rate cuts from the Federal Reserve. This week’s jump in energy prices has stoked inflation fears. 

Even before the renewed US-Israeli attack on Iran this weekend, several Fed officials expressed their concerns over rising inflation. Some even suggested that the Fed’s next monetary policy move should be a hike, rather than a cut.

The yield on the US 10-year Treasury crept up another couple of basis points to 4.08%, having fallen to 3.92% briefly on Monday. The CME’s FedWatch Tool suggests that there may still be 50 basis points-worth (bps) of rate cuts this year, but now expects the first 25 bps in September, or July at the earliest, rather than June.

Gold topped $5,400 on Monday morning as traders rushed to buy on safe-haven demand following the outbreak of hostilities between Iran and a US-Israeli coalition. It pulled back a touch throughout the rest of Monday’s session before steadying and pushing back up towards $5,400 during yesterday’s Asian Pacific session. Then it collapsed.

It dropped around 7%, breaking back below $5,000 early yesterday afternoon. Since then, it has crept higher and appears to have $5,200 as its next target. This marked an area of consolidation for gold last month. So, it will be interesting to see if it can hold around this level as the situation across the Middle East unfolds.

Source: TN Trader

It has been a similar story for silver. On Sunday night, silver jumped to a four-week high just under $96.50 per ounce. But it started to struggle to hold onto gains as Monday morning progressed.

Then it also slumped, going on to break below $78 yesterday morning, for a drop of 19% from Sunday’s high. It has managed to make back a proportion of those losses since yesterday afternoon and was trading around $86.50 mid-morning.

This area has previously acted as support, so it will be interesting to see if it now offers some resistance. In the bigger picture, there is some support around $80, but a prolonged break below here increases the risk of a deeper pullback. On the other hand, the bulls will be pushing for a break above $90.

Source: TN Trader

Crude oil was firmer in early trade this morning, but it started to give back early gains as the session progressed. Yesterday, front-month WTI hit its highest level since June last year, coming within 50 cents of the old $77.70 top. It subsequently pulled back, but prices picked up again this morning.

Source: TN Trader

Last summer, prices spiked to multi-month highs as the US joined Israel in a joint attack on Iran’s air defences and nuclear facilities. Oil then reversed direction, giving back most of its gains in a couple of days. But back then, the Iranian response was tepid and performative, and the Strait of Hormuz remained open.

This time, Tehran acknowledges that the joint US-Israeli onslaught is existential for the regime, and consequently, their response has been far more aggressive. Iran has lashed out at its near-neighbours and has managed to block all commercial shipping through the Strait of Hormuz.

This has disrupted the passage of a significant proportion of crude oil and Liquefied Natural Gas (LNG). This should keep energy prices elevated until the Strait is reopened for shipping. President Trump has pledged US naval support and insurance for commercial ships through the Strait. If this proves successful, then that would remove a chunk of risk premium currently in the oil price.

Bitcoin shot higher this morning, taking out resistance at $70,000 to hit $71,500, its best level since early February. The breakthrough came after a four-week period in which Bitcoin traded sideways, consolidating after hitting a 16-month low just above $60,000.

The big question now is whether it can build on these gains, which would mean that Bitcoin must hold above $70,000 on any future pullback. The daily MACD is looking quite supportive, as it is trending upwards off previously oversold levels. But there’s still the danger that this could prove to be a false breakout, so it’s time to exercise some caution.

Ether was trading above $2,000 this morning. But as yet, it hasn’t gained enough upside momentum to break out of its own trading range of $1,800 to $2,150.

The escalating war in the Middle East continues to drive volatility across global markets, lifting energy prices and intensifying inflation concerns. Safe-haven flows into the US Dollar and precious metals highlight the defensive positioning underway, while equities remain vulnerable to sharp swings as headlines evolve.

Attention now turns to upcoming US labour data, including Friday’s Non-Farm Payrolls report, which could influence Federal Reserve expectations. With the March VIX holding near 22.00, investors are weighing whether the current sell-off presents a tactical buying opportunity or the early stages of a more sustained bearish shift.