US Stocks Rally as Geopolitical Tensions – Dow up 1%
US equity markets finished the overnight session in positive territory, recovering late in the day as technology stocks led a broad-based rally. Improved sentiment followed signs of easing geopolitical tensions after President Trump confirmed the completion of a trade agreement with India and indicated that discussions between Iran and Washington were underway. The Dow Jones rose 1.05% to close at 49,407, while the S&P 500 added 0.54% to finish at 6,976. The Nasdaq also advanced, gaining 0.56% to end the session at 23,592.In currency and fixed-income markets, the US dollar and Treasury yields both moved sharply higher as another round of US economic data exceeded expectations. The US Dollar Index climbed 0.65% to 97.62, while Treasury yields rose across the curve, with the 2-year yield increasing by 4.9 basis points to 3.572% and the 10-year yield up 4.2 basis points at 4.277%. Commodities once again recorded the most significant moves. Oil prices fell sharply on the Iran-related headlines, with Brent crude dropping 3.95% to $66.58 per barrel and WTI crude sliding 4.71% to $62.14. Precious metals also experienced significant volatility, with gold closing the day down 3.86% at $4,676.38 and silver close to flat in very large ranges.
Metals Remain Volatile as Fallout from Historic Moves Continues
Both gold and silver experienced another volatile day’s trading yesterday. Both precious metals lost ground again, but probably more concerning for traders was the pace of the moves they experienced, as liquidity remained at a premium after the huge crashes on Friday. Gold ultimately finished nearly 4% down but traded in a 10% range over the course of the day, while silver lost 6% on the day, having traded in an 18.8% range.Once again, this type of volatility is far from normal, and liquidity providers are pricing the pairs accordingly. Market participants are expecting these conditions to continue in the coming sessions as the fallout from the recent move to historic highs and the consequent crash continues to be evaluated across the market. Short-term technical levels lose much of their relevance in these kinds of thin markets, as flows dictate moves; however, some of the longer-term levels will hold their relevance, albeit with a bit more “flexibility” around them. Many traders will tend to keep their powder dry in these conditions until markets start to normalize.
US Data in Doubt for Market This Week
It is supposed to be a relatively busy week on the macroeconomic calendar, and traders were expecting focus to move to data and fundamentals. However, news of another partial US government shutdown has put US data releases in doubt.The Asian session, however, will definitely see the Reserve Bank of Australia make its latest rate call, where it is expected to raise interest rates by 25 basis points in response to elevated inflation and a resilient labor market. The policy decision is due at 2:30 pm AEST, followed by the RBA press conference at 3:30 pm. Later in the session, attention will turn to the United States, with JOLTS job openings data scheduled for release at 1:00 am AEST. However, those reports of the US government shutdown may delay this release, as well as other key labor market data later in the week, including Friday’s Non-Farm Payrolls report.
Explore all upcoming market events in the Economic Calendar.
