US Stocks Push Higher Again on Renewed Middle East Optimism – Dow up 1.7%
US equity markets rallied strongly overnight as investors continued to price in the possibility of an end to the conflict in the Middle East. The Dow Jones surged 1.73% to a fresh record high of 51,561, while the S&P 500 added 0.41% to close at 7,584. The Nasdaq underperformed as AI doubts plagued the tech sector, slipping 0.09% to finish at 26,830. The gains came despite reports that Hezbollah had rejected the latest ceasefire proposal, with traders focusing instead on the prospect of further diplomatic progress in the region.
The improvement in risk sentiment weighed on traditional safe-haven assets, with the US Dollar Index falling 0.10% to 99.43. Treasury yields also moved lower, with the 2-year yield declining 3.9 basis points to 4.043% and the benchmark 10-year yield easing 2.2 basis points to 4.473%.
Oil prices fell sharply as traders pared back some of the geopolitical risk premium that has supported energy markets in recent weeks. Brent crude dropped 2.71% to settle at $95.16 per barrel, while WTI crude declined 3.10% to $93.04 per barrel. Gold benefited from the softer US dollar, rising 0.95% to $4,473.89 per ounce.
Gold Poised for Fresh Moves Today
Gold continues to confound traditional traders as it moves strongly in line with US yields and the dollar on a daily basis rather than with the safe-haven status that it usually enjoys. The last few months have been particularly strange for many market participants after gold appreciated well over 30% in the first few months of the year, apparently on geopolitical concerns. Yet, a conflict in the Middle East, paralysing the movement of 20% of the world’s oil flow, actually led to a 25% decrease in the world’s favourite precious metal. Therefore, traders will continue to play the dollar side of the equation, which means tonight’s Non-Farm Payrolls release could see gold break out of a shrinking range that it has been trading in over the last few weeks. It has traded between $4,400 and $4,600 for most of the last few weeks, and a big surprise tonight could see the dollar fly and take gold with it. Support is now coming in around $4,375, with resistance at $4,540, and traders are expecting one of those levels to be challenged in the coming sessions, with any big differentials from expectations likely to lead to break trades.
Non-Farm Payrolls Day Again
Geopolitics will no doubt have another large part to play in today’s price action across all markets; however, attention will turn to fundamentals on the New York open, with the key US employment report due out. The Non-Farm Payrolls release (exp +85k), Unemployment Rate (exp 4.3%), and Average Hourly Earnings (exp +0.3%) figures are all due early in the day and are likely to provide important guidance on the health of the US labour market and the outlook for Federal Reserve policy. Canadian Employment Change data (exp +10.6k) and the Unemployment Rate (exp 6.9%) will also be released at the same time, followed by the Ivey PMI (exp 54.5), but as always, expect the US numbers to dominate sentiment.
