General Market Analysis – 28/10/24

Mixed End to the Week in US Markets – Nasdaq up 0.5%

US stock markets closed out the week on Friday with mixed results as investors braced for what could be a pivotal few weeks for global markets. Tech stocks outperformed once again, with the Nasdaq gaining 0.56% by the close. In contrast, the other two major indices fared worse, with the S&P dipping slightly by 0.03% and the Dow dropping 0.61%. US Treasury yields continued their upward trend, with the 2-year yield rising by 2.8 basis points to 4.094% and the 10-year yield up 2.4 basis points to 4.226%. Meanwhile, the dollar regained strength in the foreign exchange markets, with the DXY index closing Friday up 0.18% following a drop the previous day. Oil prices saw notable movement as traders priced in the possibility of increased conflict in the Middle East. Brent rose 2.25% to $76.05 and WTI climbed 2.27% to $71.78, although the limited military action taken by Israel over the weekend led oil to open lower this morning. Gold prices also rose on Friday, gaining 0.44%, but have since opened lower in the Asian markets today.

Traders Anticipate Increased Volatility Ahead

Investors are preparing for an active trading period ahead, with numerous economic data releases and central bank meetings on the horizon. Nonetheless, many view geopolitical events as the primary drivers of volatility. This morning, significant price gaps from Friday’s closing levels have already been observed, with oil and gold prices beginning the day substantially lower than last week’s close. Brent oil, for instance, opened in Asia with a nearly 5% drop, while WTI fell close to 4%, and gold started the day over 0.5% down. Concerns that Israel might target Iranian oil facilities over the weekend had prompted a spike in prices on Friday, but the limited strikes on military installations have been interpreted positively by markets, both for oil prices and as an indication of potential ceasefire talks. Traders expect such fluctuations to continue, especially with the US election on the horizon and ongoing geopolitical tensions.

A Crucial Week Ahead for Traders

While the macroeconomic calendar for today is sparse, traders are bracing for a volatile start, especially given the price gaps on the Asian open following unexpected geopolitical developments in the Middle East and Japan. Oil and gold have taken a hit due to milder-than-expected military action by Israel over the weekend, and the yen has weakened following a surprising election result in Japan that saw the Liberal Democratic Party lose its parliamentary majority. There is little else scheduled for the day until later, when Bank of Canada Governor Tiff Macklem is due to speak. However, many anticipate further market turbulence as traders react to geopolitical updates and prepare for an eventful calendar in the weeks to come.

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