US Stocks Rally on Peace Hopes Again – Nasdaq up 2%
Global financial markets began the week on a positive footing overnight as improving sentiment surrounding developments in the Middle East encouraged investors to rotate back into risk assets. Equity markets rallied strongly, led by the technology sector, while the US dollar weakened against most major currencies and Treasury yields edged modestly higher.
US equities recorded broad-based gains, with the Nasdaq outperforming after rising 2.07% to close at 25,820. The S&P 500 advanced 1.17% to finish at 7,440, while the Dow Jones Industrial Average added 0.59% to close at 52,182. The move reflected renewed investor optimism that geopolitical tensions may continue to ease, supporting broader market sentiment following recent volatility.
In fixed income markets, US Treasury yields moved modestly higher as investors pared some safe-haven positioning. The two-year Treasury yield rose 1.2 basis points to 4.104%, while the benchmark 10-year yield increased 0.6 basis points to 4.374%.
The US dollar eased against most of its major counterparts, with the US Dollar Index declining 0.23% to 101.13. However, the greenback continued to strengthen against the Japanese yen, trading at its highest level in approximately four decades as monetary policy divergence between the Federal Reserve and the Bank of Japan remained firmly in focus. Traders remain on intervention watch.
Commodity markets presented a more cautious assessment of the geopolitical outlook. Despite improving risk sentiment across equity markets, oil prices continued to move higher amid lingering concerns that tensions in the Middle East could still threaten global energy supplies. Brent crude gained 1.06% to settle at US$72.75 per barrel, while West Texas Intermediate rose 1.75% to US$70.44 per barrel.
Gold Looking Vulnerable Again
Gold moved sharply lower in trading yesterday, falling 1.79% to close the New York session at $4,015.21 per ounce, bringing the precious metal back towards its lows for the year. It now sits just above trendline support on the daily chart, which comes in around the $3,975.00 level, while the annual low at $3,958.76 is barely $15 further south. Gold has largely moved in line with US yields and the dollar over the past few months, and although the dollar drifted lower in FX, yields did push higher, although not substantially, so yesterday’s outsize move does feel strongly flow-driven. Further selling in the market today should see those key levels challenged relatively swiftly, and if we see a break, from a technical perspective, it opens the way for a stronger correction down towards the $3,600 area, while any bounce sees resistance come in near recent short-term highs at $4,200 and, longer term, near the $4,300 level.
Event Calendar Kicks into Action for Traders Later Today
Despite continuing geopolitical updates influencing market moves, trader focus will turn to a busy economic calendar over the next 24 hours. There is little on the calendar in the Asian session today; however, European markets will focus on Germany’s preliminary CPI inflation data (exp. 0.0%), which will provide an important indication of price pressures across the Eurozone’s biggest economy ahead of next month’s ECB meeting. During the North American session, Canada’s monthly GDP figures (exp. +0.4% m/m) will be closely watched for further evidence on the pace of economic growth, while the US will release Conference Board Consumer Confidence (exp. 94.4) and JOLTS Job Openings (exp. 7.28mio) data. Together, these releases are expected to provide further insight into the resilience of the US consumer and labour market and could influence expectations for the Federal Reserve’s policy outlook ahead of Thursday’s key Non-Farms update.
