The Overnight Report: Directionless

Array
(
    [0] => Array
        (
        )

    [1] => Array
        (
        )

)

By Chris Weston, Head of Research, Pepperstone

Morning

-Tight ranges seen in the S&P500, with tech working and financials under pressure
-Traders massaging exposures in Nvidia ahead of earnings
-A whippy move in gold but the price couldn’t hold the prior highs
-Talk of an imminent call on an ETH ETF lifting the crypto space

Event risk in the session ahead 

As US trade rolls towards the Asian trading session, our opening calls for Asian equity indices appear somewhat heavy and the markets seems lethargic and in need of new inspiration. 

Specifically, given the moves in futures, we anticipate the Hang Seng to decline by -0.7% and the ASX200 to dip by -0.2%, although the Nikkei225 is expected to outperform, opening around 0.4% higher. 

By way of leads, the S&P closed with a modest gain of 0.1%, with the NAS100 outperforming and closing +0.7% and a new all-time closing high. Looking at the intraday tape of the S&P500, we started the cash session well trading into 5325, matching the prior all-time highs (ATHs), but the buyers went missing, and the index fell under its weight with sellers driving pricing into 5302. However, the index managed to recover slightly to close at 5308, although still near the day's lows. 

42% of S&P500 stocks closed higher, indicating fairly poor breadth and where trading volumes through the index were -20% below the 30-day average, reflecting of the lack of intraday catalysts and any urgent need to put new money to work.

Financials weighed on the index performance, notably, JPM closed -4.5%, where the sellers pushed the stock lower all through the day, with few prepared to step in and change the intraday trend – talk of refraining from buybacks and a further focus on Jamie Dimon’s exit strategy clearly impacting. 

The tech sector stood out, with a 1.3% increase, led by broad-based gains across the board, particularly for NVIDIA, which closed +2.5% at $947. Semi’s, more broadly look solid, with the SOX ETF (iShares Semi’s ETF) trading into $233 and new run highs and it feels like there is more juice left in the upside move.

In the absence of any tier 1 economic data risk, all eyes are now on Nvidia’s earnings announcement tomorrow after the market close, with the possibility of surpassing the all-time high at $974. The implied move for the day stands at 8.6%, so we know it could get lively in the post-market.

In the US Treasury complex, there was modest selling across the curve, with the 2-year Treasury up by 2 basis points at 4.84% and the 10-year Treasury at 4.44%, both showing a slight in yield.  This selling trend supported the USD, with the DXY up by 0.2%, coming off its high at $104.65.

We saw good interest to fade rallies in the AUDUSD above 0.6700, pressured as the Hang Seng saw some of the heat come out of the recent rally. USDJPY also saw a slight lift, currently at $156.21, with attention focused on surpassing the recent swing high seen on 14 May of 156.75. 

Despite limited US data driving the market, attention remains on commodity markets, particularly gold, which traded in a punchy range of US$2450 to US$2407 – currently US$2425, we see that the net change on the session is +0.4%, but the bulls would have wanted to see a close above the prior ATH of US$2431.47, and the failure to do so may be telling – indecision is the theme I’m seeing in the price action and the probability of consolidation in the near-term and some chop is the risk. 

Silver saw a marginal increase of 0.4%, while copper futures rose by 1%, and iron ore futures edged up by 0.8%. 

The highlight of the day, and where we’ve seen the big moves, have been seen in the crypto scene, with clear anticipation building of an impending approval for an Ethereum ETF by the SEC.

If the crypto bulls were looking for the catalyst to fuel the demand argument, this is seemingly it, although it is not fait accompli just yet. Ethereum surged by 9.1%, with impressive moves also seen in Solana and Uniswap, while BTC hit the 70k mark – given the flows, range expansion and price action, pullbacks in the various coins should be shallow and well-supported – ETH and BTC go higher short-term in my view. 

Looking ahead, the focus is on the RBA minutes, although little new information that could materially drive the AUD is expected. In Canada, attention is on the CPI numbers, with expectations of a drop in headline CPI to 2.7% (from 2.9%) and in the core (trimmed mean) number to 2.9% (from 3.1%).

CAD swaps are pricing in -10 basis points of cuts for the 5 June BOC meeting and over -50 basis points by the end of the year. Therefore, the CPI numbers could clearly impact the USDCAD pair, potentially leading to a move below recent lows of 1.3588 or conversely above 1.3650, depending on the CPI outcome. 

Additionally, speeches from Fed members Christopher Waller, Thomas Barkin, John Williams, and Raphael Bostic could provide new insights that could modestly impact the US bond and interest rates market, where US swaps now price -40bp of Fed cuts by December. 

The Australian share market over the past thirty days…

For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms