Markets are dominated by a bid in AI and chip stocks, which is pushing Asian and US tech indices to record highs.
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- The most noteworthy item today is the continuing strong bid we are seeing in the tech sector, especially in AI and chip stocks, on optimism about the scope for growth in AI companies. There is also a tailwind in the shape of stronger risk sentiment driven by optimism that a deal is fairly close to end the US/Iran war. I believe the optimism is misplaced as the Iranian regime will never agree to a deal which President Trump would be able to sell as a "good deal". However, for the time being, it makes sense to follow the trend, and trend and momentum traders will want to be long of the NASDAQ 100 Index, the KOSPI Composite, and the Nikkei 225 Index. The NASDAQ 100 will be in special focus as it has broken above the major round number at 30,000 for the first time.
- The other major noteworthy asset affected by the Iran situation is Crude Oil, which is continuing to trade gently lower. It looks bearish and ready to fall further, which makes sense due to optimism over a peace deal, with the first effect of such a deal likely to be the full reopening of the Strait of Hormuz.
- It is worth noting that reports about the ongoing negotiations between Iran and the USA are highly confusing, contradictory, and hard to follow. It is probably best to ignore the noise and watch what prices do when they are not just ranging.
- Risk sentiment is somewhat positive but is gently see-sawing, being very sensitive to every headline or rumour about Iran or the wider Middle East. This is causing mostly choppy, ranging price action in much of the Forex market. Since today's Tokyo open, the New Zealand Dollar has been the strongest major currency, and the Japanese Yen the weakest, putting the NZD/JPY currency cross in focus. The Australian Dollar is weaker on falling inflation data.
- Australian CPI (inflation) came in lower than expected earlier today, falling from an annualised rate of 4.6% to 4.2%. The consensus forecast was 4.4%.
- The Reserve Bank of New Zealand has held its Official Cash Rate unchanged at 2.25%. The Bank's rhetoric was seen as a slightly dovish tilt, but the Kiwi is up anyway.
- Crypto generally looks weakly bearish, with Bitcoin trading lower not far from support.
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