Category: Indexes

  • DAX Set to Consolidate Gains Amid Eurozone Inflation Dip – Wednesday, 13 May

    Snapshot: The DAX is trading around 24,060, up 0.5%, supported by receding Eurozone HICP inflation, now at 2.0% YoY. Today’s session will likely be driven by spillover from European markets and risk sentiment into the NY open.

    • Watch for a break above 24,100 to signal further upside momentum.
    • Rising VIX (now 18.38) remains a risk, signaling potential volatility.

    Bias into NY: We favour a neutral-to-bullish bias, contingent on the DAX holding above 24,000. US yields are firming slightly, but receding Eurozone inflation will likely support a stable risk environment, barring any surprises from upcoming US data.

  • NY Session Tactical Brief – Tuesday, 12 May

    Regime: Risk-off, driven by stronger-than-expected US CPI data and escalating Middle East tensions, pushing the VIX higher and US 10Y yields up 5bp to 4.43%.

    Today’s market themes:

    • Real-rate repricing: Hotter CPI print fuels hawkish Fed bets, pressuring risk assets.
    • Geopolitical risk: Iran war uncertainty keeps oil elevated, supporting inflation concerns.
    • Crowded shorts: Potential for squeeze in JPY, GBP, and NZD if risk sentiment improves.

    The setup: The stronger-than-expected US CPI print has triggered a hawkish repricing of Fed expectations, sending US yields higher and the dollar stronger. This is pressuring risk assets, particularly tech and emerging markets. The trade is to fade rallies in risk assets, but watch for potential short squeezes in crowded short currencies if geopolitical risks abate or US data disappoints. US 10Y at 4.43%, DXY at 98.25.

    Watch list (native time per event):

    • 08:30 ET USD: Core CPI m/m (forecast 0.3%, prior 0.2%)
    • 11:59 ET USD: Fed Chair Nomination Vote (forecast Pass, prior —)
    • 11:30 AEST AUD: Wage Price Index q/q (forecast 0.8%, prior 0.8%)

    Bias by asset:

    STRICT SILO RULE: For every non-USD asset, the Domestic line MUST contain only domestic content (home central bank / domestic data / domestic yield / domestic political-fiscal driver). USD, DXY, Fed, US yields, and risk regime go in the Cross line — never in Domestic. If no fresh domestic catalyst exists, write “No fresh domestic catalyst — sensitive to US response” in Domestic. For commodities, Domestic = real-yields / supply / inventories / flows. For BTC, Domestic = funding / ETF flow / on-chain.

    • DXY:
      • Direction: Bullish.
      • Domestic (US): Hawkish Fed repricing on CPI beat. Rising US yields support.
      • Cross: Risk-off flows, safe-haven demand, EM weakness.
      • Levels: Resistance at 98.50, support at 98.00.
    • EUR/USD:
      • Direction: Bearish.
      • Domestic (EU): No fresh domestic catalyst — sensitive to US response.
      • Cross: Stronger DXY, widening US-DE 10Y yield spread, risk-off sentiment.
      • Levels: Resistance at 1.0800, support at 1.0750.
    • GBP/USD (Cable):
      • Direction: Bearish.
      • Domestic (UK): Rising UK borrowing costs pressure.
      • Cross: Stronger DXY, widening US-UK 10Y yield spread, risk aversion.
      • Levels: Resistance at 1.3550, support at 1.3500.
    • USD/JPY:
      • Direction: Bullish.
      • Domestic (JP): BoJ remains dovish. Intervention risk looming.
      • Cross: Higher US 10Y yields, strong DXY, risk-off bids into USD.
      • Levels: Resistance at 158.00, support at 157.00.
    • USD/CAD (Loonie):
      • Direction: Bullish.
      • Domestic (CA): No fresh domestic catalyst — sensitive to US response.
      • Cross: Stronger DXY, US-CA 10Y yield spread widening.
      • Levels: Resistance at 1.3750, support at 1.3700.
    • AUD/USD (Aussie):
      • Direction: Bearish.
      • Domestic (AU): Awaiting Wage Price Index data.
      • Cross: Stronger DXY, US-AU 10Y yield spread widening, risk aversion.
      • Levels: Resistance at 0.7220, support at 0.7175.
    • NZD/USD (Kiwi):
      • Direction: Bearish.
      • Domestic (NZ): RBNZ easing bias remains in place.
      • Cross: Stronger DXY, US-NZ 10Y yield spread widening, risk-off flows.
      • Levels: Resistance at 0.5960, support at 0.5920.
    • USD/CHF (Swissy):
      • Direction: Bullish.
      • Domestic (CH): No fresh domestic catalyst — sensitive to US response.
      • Cross: Stronger DXY, waning safe-haven appeal of CHF.
      • Levels: Resistance at 0.7820, support at 0.7780.
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): EUR/GBP: Neutral, EUR/JPY: Bearish, GBP/JPY: Bearish.
      • Domestic: Relative central bank policy divergence remains key driver.
      • Cross: DXY strength supports JPY and GBP.
      • Levels: Monitor individual cross support/resistance.
    • XAU (Gold):
      • Direction: Bearish.
      • Domestic (asset-specific): Rising real yields pressure gold.
      • Cross: Stronger DXY, risk-off flows less supportive with rates rising.
      • Levels: Resistance at $4,720, support at $4,680.
    • XAG (Silver):
      • Direction: Bearish.
      • Domestic (asset-specific): No fresh catalyst — sensitive to overall risk tone.
      • Cross: Stronger DXY, risk-off sentiment, industrial demand concerns.
      • Levels: Monitor gold for direction, lower volatility.
    • WTI / Brent:
      • Direction: Bullish.
      • Domestic (asset-specific): Supply disruption fears, escalating geopolitical tensions.
      • Cross: Weaker DXY provides some support, but risk-off a headwind.
      • Levels: Watch for Iran ceasefire news.
    • Copper:
      • Direction: Bearish.
      • Domestic (asset-specific): China growth concerns weigh.
      • Cross: Stronger DXY, global growth proxy suffers from risk-off sentiment.
      • Levels: Monitor China data.
    • SPX:
      • Direction: Bearish.
      • Domestic (US): Higher yields, earnings rotation away from growth.
      • Cross: Elevated VIX, global risk-off sentiment.
      • Levels: Futures at 5185. Support at 5170, resistance at 5200.
    • NDX:
      • Direction: Bearish.
      • Domestic (US): Sensitive to real yields, mega-cap earnings under pressure.
      • Cross: Rates sensitivity, VIX elevation.
      • Levels: Monitor tech stocks for price action.
    • US30 (Dow):
      • Direction: Neutral.
      • Domestic (US): Financials and industrials facing mixed earnings.
      • Cross: Bond-yield reaction muted.
      • Levels: Trading near flatline, awaiting catalyst.
    • UK100 (FTSE):
      • Direction: Bearish.
      • Domestic (UK): Weaker Sterling, higher Gilt yields.
      • Cross: Global risk, US tone negative.
      • Levels: Trading lower in Europe.
    • DAX:
      • Direction: Bearish.
      • Domestic (DE): No fresh domestic catalyst — sensitive to US response.
      • Cross: US tech weakness, stronger DXY, risk aversion.
      • Levels: Trading lower on lack of drivers.
    • Nikkei:
      • Direction: Bearish.
      • Domestic (JP): JPY weakness capped by intervention risk.
      • Cross: US tech selling pressure, risk off.
      • Levels: High close, vulnerable to correction.
    • BTC:
      • Direction: Bearish.
      • Domestic (asset-specific): Funding rates easing, ETF flows slowing.
      • Cross: Stronger DXY, risk aversion, Nasdaq correlation.
      • Levels: Finding soft support after overnight retreat.

    Positioning watch: CFTC data shows crowded longs in AUD, USD, Copper, and Bitcoin, creating potential downside risk if data disappoints or risk sentiment shifts. Crowded shorts in JPY, GBP, and NZD present squeeze potential if risk appetite recovers.

    The pain trade: A surprise dovish signal from the Fed Chair Nomination Vote, coupled with weaker-than-expected US data later in the week, would trigger a sharp short squeeze in JPY, GBP, and NZD, while simultaneously hammering the USD.

  • S&P 500 Braces for CPI After Yield Curve Bear Steepen – Tuesday, 12 May

    Where we are: S&P 500 futures are trading around 5185, coming off overnight lows near 5170. The index saw a mild pullback in early EU cash trading, mirroring pre-market weakness after the hot CPI print. The futures contract remains below Friday’s close, suggesting a continuation of last week’s choppy consolidation around the 5200 level.

    What’s driving it: The immediate driver is the hotter-than-expected CPI data, with the headline figure printing at 3.7% y/y versus the 3.3% expected and Core CPI at 0.3% m/m versus the 0.2% expected. This has solidified concerns about persistent inflation and the potential for the Fed to delay any rate cuts, evidenced by the 2s10s steepening to 0.47%. Although the 10Y yield has fallen 3bp since Friday, the market is focused on breakeven inflation rising 2bp, contributing to equity unease. This reinforces the expectation that the Fed will maintain its hawkish stance, further weighing on risk sentiment.

    • CPI y/y printed 3.7% vs 3.3% expected, triggering an initial risk-off reaction.
    • The 10Y Breakeven Inflation rate rose 2bp, suggesting inflation expectations are becoming unanchored.
    • Despite modestly short positioning in S&P 500 futures, there’s limited squeeze risk given the prevailing macro headwinds.

    NY session focus: All eyes will be on the market’s reaction to the 08:30 ET CPI report. Traders should watch for potential rotation into value names, particularly if energy prices continue to climb. A break below 5170 could open the door for a test of the 5150 level. The 11:59 ET Fed Chair Nomination Vote is a known positive, but unlikely to offset inflation concerns. The working trade is shorting rallies into the 5200 resistance; at risk is the long-duration tech trade given the repricing of rates. The pain trade here is a sudden dovish pivot from the Fed, which seems increasingly unlikely in the near term.

  • Nasdaq 100 Faces Inflation Test; Bulls Prepare to Defend – Tuesday, 12 May

    Where we are: Nasdaq 100 futures are currently trading around 19,850, retreating from overnight highs after the hotter-than-expected CPI print. The index is trading roughly 0.75% below yesterday’s New York close, with the overnight range spanning approximately 150 points. Initial support lies at 19,800, with further downside targeting 19,700.

    What’s driving it: Today’s hotter-than-expected CPI data is the dominant driver, reigniting fears of persistent inflation and diminishing the likelihood of further Fed rate cuts this year. The market is now repricing the probability of easing, putting upward pressure on real yields and weighing on risk assets. While the 10-year Treasury yield dipped slightly to 4.38% yesterday, real yields remain elevated at 1.93%, creating a headwind for tech stocks and other growth sectors. The prospect of a passed Fed Chair nomination vote later today is unlikely to offset the inflationary concerns.

    • Headline CPI y/y printed at 3.8% versus the 3.7% forecast, exceeding expectations and fueling inflation worries.
    • The 10-year breakeven inflation rate sits at 2.47%, reflecting the market’s perception of rising inflation expectations.
    • Speculator positioning in Nasdaq 100 futures is modestly long, but with only 0.4% of open interest, suggesting limited squeeze potential despite the recent pullback.

    NY session focus: The immediate focus is on digesting the 08:30 ET CPI release and assessing the market’s reaction. Keep an eye on the 10-year Treasury yield and real yield moves as key indicators. Watch for support around 19,700; a break below that level could trigger further selling. The trade that’s working is short NDX on rallies. The trade at risk is dip-buying until the inflation picture becomes clearer. The pain trade would be a surprisingly dovish pivot from the Fed, sparking a rapid rally in tech and growth stocks.

  • Dow Futures Pare Gains After Hot CPI Print – Tuesday, 12 May

    Where we are: Dow Jones futures are currently trading near the flatline, paring earlier gains in pre-market trading, around 39,450. The overnight range has been relatively contained as traders digested the higher-than-expected CPI figures released moments ago. This level sits slightly below yesterday’s New York close, suggesting a cautious open ahead.

    What’s driving it: The higher-than-forecast CPI print is the dominant driver this morning, casting a shadow over the market. Headline CPI y/y hit 3.8%, exceeding the expected 3.7%, reinforcing concerns that inflationary pressures are proving stickier than anticipated. This impacts the Dow directly by denting earnings prospective, especially for companies with lower pricing power, and indirectly through the anticipated reduction in Fed rate cut expectations. The US 10Y yield, despite yesterday’s decline, remains elevated at 4.38%, offering an alternative to equities.

    • Headline CPI y/y rose to 3.8%, above the 3.7% consensus.
    • The US 10Y Real Yield remains at 1.93%, limiting equity upside.
    • Net non-commercial positioning in Dow futures is modestly short at -677 contracts, suggesting limited immediate squeeze potential.

    NY session focus: All eyes will be on the market’s reaction to the 08:30 ET CPI release, with traders closely monitoring the Dow’s ability to hold above 39,400. Key levels to watch are 39,300 as immediate support and 39,550 as initial resistance. Given the hot CPI, the short Dow trade targeting 39,000 gains traction. The vote on the Fed Chair nomination at 11:59 ET will be a secondary focal point but is widely expected to pass. The pain trade would be a rapid reversal, fueled by a dovish interpretation of the Fed Chair vote outcome, pushing the Dow above 39,600.

  • Footsie Under Pressure as Political Risks Mount – Tuesday, 12 May

    Where we are: The FTSE 100 is currently trading around 8,235, extending losses from yesterday’s close. The index has been under pressure in European morning trade, testing its six-week low, within an overnight range of roughly 8,210 – 8,280. This level is significantly below the prior NY close, indicating substantial negative sentiment.

    What’s driving it: Domestic political uncertainty is the primary driver, weighing on investor confidence. Rising pressure on Prime Minister Starmer after weak local election results has fueled concerns about political stability, overriding any positive signals from recent macro prints showing sticky inflation. While UK CPI remains elevated, with the headline at 3.3% YoY in March, and unemployment showing a slight dip to 4.9% in January, these figures are secondary to the immediate political headwinds. EQT’s ‘final’ offer for Intertek is providing some minor support, but is not enough to offset the broad market weakness. Falling US 10Y real yields could be seen as a constructive macro tailwind but the domestic uncertainty overrides that.

    • More than 70 Labour MPs are reportedly calling for Prime Minister Starmer to outline a timetable for his departure.
    • The FTSE 100 banks are seeing significant declines, with HSBC, Lloyds, Barclays, NatWest, and Standard Chartered all retreating.
    • Despite reporting earnings ahead of expectations, Vodafone shares are down over 2.5%.

    NY session focus: The US session will likely exacerbate existing trends, with risk sentiment heavily influenced by the political situation in the UK. Focus will be on how US equities react to the ongoing political risks, but the Footsie’s trajectory will largely be shaped by domestic factors. Watch for a potential test of the 8,200 level, a break of which could trigger further selling. Any positive news regarding UK political stability could provide a short-covering rally. The trade that’s working is shorting UK banks. The pain trade for the FTSE 100 is a sudden resolution to the political turmoil coupled with a resurgence in global risk appetite.

  • Nikkei 225 Faces Inflation Headwinds – Tuesday, 12 May

    Snapshot: The Nikkei 225 closed at 62,743, boosted by tech strength and AI optimism. However, rising oil prices are stoking inflation concerns, as reflected in the BoJ’s latest meeting minutes.

    • Watch for further signals from the BoJ regarding additional rate hikes at upcoming meetings, particularly given upside risks to energy prices.
    • Heightened geopolitical risks, particularly regarding the US-Iran situation, could weigh on sentiment.

    Bias into NY: Cautiously bullish, but expect the Nikkei’s upside to be capped near recent highs, around 62,800, as traders digest the BoJ’s hawkish lean and monitor potential spillover from US yield moves and risk sentiment. US 10-year yields are currently at 4.38%, and watching the 10Y Breakeven at 2.47% for signals.

  • DAX Under Pressure as Rate-Cut Hopes Fade – Tuesday, 12 May

    Snapshot: The DAX is currently trading around 24,100, down roughly 1% on the session, pressured by a lack of fresh domestic catalysts and lingering worries over Middle East tensions. Focus remains on the ECB’s communication around future rate paths. Today’s catalyst will be how US markets digest the existing uncertainty.

    • Watch 24,000 as initial support; a break there opens the door to further downside.
    • Geopolitical risk remains elevated, with any escalation in the Middle East likely to trigger further risk-off sentiment in the NY session.

    Bias into NY: Bearish. The lack of domestic upside drivers coupled with the prevailing risk-off mood suggests further pressure on the DAX, potentially testing the 23,800 level.

  • NY Session Tactical Brief – Monday, 11 May

    Regime: Risk-off, with oil spiking on escalating Middle East tensions and Trump rejecting Iran’s peace offer, VIX at 17.08 and 10Y yields slightly higher.

    Today’s market themes:

    • Geopolitical Risk: Middle East tensions driving oil and safe-haven flows.
    • Rate Divergence: CB policy driving FX crosses, particularly EUR/GBP and EUR/JPY.
    • Commodity Strength: Silver and Copper continue to show strong performance.

    The setup: Geopolitical tensions are escalating quickly, pushing oil higher and boosting safe-haven demand. The market is pricing in a higher risk of supply disruptions from the Middle East. Watch for further headlines as the situation develops; a break above $105 in Brent could trigger a larger risk-off move. US 10Y yield is at 4.393%.

    Watch list (native time per event):

    • 09:30 CST CNY: CPI y/y (forecast 0.9%, prior 1.0%)
    • 09:30 CST CNY: PPI y/y (forecast 1.7%, prior 0.5%)

    Bias by asset:

    • DXY:
      • Direction: Neutral
      • Domestic (US): Fed watching data; US yields steady
      • Cross: Geopolitical risk-off; Euro weakness capping upside
      • Levels: Support: 97.80, Resistance: 98.03
    • EUR/USD:
      • Direction: Down
      • Domestic (EU): ECB divergence widening vs BoE and Fed
      • Cross: DXY strength / US-DE 10Y spread widening / Risk-off
      • Levels: Support: 1.1749, Resistance: 1.1782
    • GBP/USD (Cable):
      • Direction: Neutral
      • Domestic (UK): BoE hawkish hold / higher Gilt yields supporting
      • Cross: DXY / US-UK 10Y spread / Risk-off offsets domestic strength
      • Levels: Support: 1.3570, Resistance: 1.3616
    • USD/JPY:
      • Direction: Up
      • Domestic (JP): BoJ dovish / JGB yields capped / Intervention watch
      • Cross: Higher US 10Y yield / DXY / risk regime
      • Levels: Support: 156.76, Resistance: 157.18
    • USD/CAD (Loonie):
      • Direction: Up
      • Domestic (CA): BoC dovish / WTI strength offset by CAD weakness
      • Cross: DXY / US-CA 10Y spread
      • Levels: Support: 1.3661, Resistance: 1.3695
    • AUD/USD (Aussie):
      • Direction: Down
      • Domestic (AU): RBA neutral / China data sensitivity
      • Cross: DXY strength / US-AU 10Y / China growth uncertainty
      • Levels: Support: 0.7220, Resistance: 0.7249
    • NZD/USD (Kiwi):
      • Direction: Down
      • Domestic (NZ): RBNZ dovish / dairy prices lackluster
      • Cross: DXY strength / US-NZ 10Y / risk-off sentiment
      • Levels: Support: 0.5939, Resistance: 0.5957
    • USD/CHF (Swissy):
      • Direction: Up
      • Domestic (CH): SNB dovish / Swiss yields low
      • Cross: DXY strength / safe-haven unwinding
      • Levels: Support: 0.7774, Resistance: 0.7795
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): EUR/GBP: Down; EUR/JPY: Up; GBP/JPY: Up
      • Domestic: EUR/GBP: BoE vs ECB; EUR/JPY & GBP/JPY: rate divergence
      • Cross: DXY / risk regime / cross-of-crosses dynamics
      • Levels: EUR/GBP: 0.8647/0.8668; EUR/JPY: 184.39/185.02; GBP/JPY: 212.73/213.87
    • XAU (Gold):
      • Direction: Down
      • Domestic (asset-specific): Rising real yields / ETF outflows
      • Cross: DXY strength / risk-off demand limited
      • Levels: Support: 4655.6, Resistance: 4714.2
    • XAG (Silver):
      • Direction: Up
      • Domestic (asset-specific): Industrial demand / Gold strength
      • Cross: DXY / risk regime
      • Levels: Support: 7953.000, Resistance: 8418.000
    • WTI / Brent:
      • Direction: Up
      • Domestic (asset-specific): Geopolitical risk / potential supply disruption
      • Cross: DXY / risk regime
      • Levels: WTI: Support: 96.64, Resistance: 100.35; Brent: Support: 102.90, Resistance: 105.97
    • Copper:
      • Direction: Up
      • Domestic (asset-specific): China stimulus / LME stock levels
      • Cross: DXY / global growth proxy
      • Levels: Support: 625.4000, Resistance: 641.4300
    • SPX:
      • Direction: Down
      • Domestic (US): higher yields / earnings plateau
      • Cross: VIX rising / global risk aversion
      • Levels: Futures support: 7391.00, Resistance: 7420.25, Cash support: 7398.90
    • NDX:
      • Direction: Down
      • Domestic (US): Real yields / AI bubble potential
      • Cross: Rates sensitive / Rising VIX
      • Levels: Futures support: 29227.50, Resistance: 29399.25
    • US30 (Dow):
      • Direction: Down
      • Domestic (US): Cyclical rotation out / yields impact
      • Cross: bond-yield reaction
      • Levels: Futures support: 49471, Resistance: 49706
    • UK100 (FTSE):
      • Direction: Down
      • Domestic (UK): Sterling strength / Gilt yields rising
      • Cross: global risk aversion / US tone
      • Levels: Support: 22742, Resistance: 22850
    • DAX:
      • Direction: Down
      • Domestic (DE): Lower Bund yields / weaker outlook
      • Cross: US tech weakness / DXY / risk regime
      • Levels: Support: 24204, Resistance: 24362
    • Nikkei:
      • Direction: Down
      • Domestic (JP): Strong JPY / JGB yields rising slightly
      • Cross: US tech weakness / risk regime
      • Levels: Support: 62393, Resistance: 63385
    • BTC:
      • Direction: Down
      • Domestic (asset-specific): Crowded longs / Funding rates high
      • Cross: DXY / risk regime / Nasdaq correlation
      • Levels: Support: 62393, Resistance: 63385

    Positioning watch: AUD/USD and Bitcoin are crowded longs (96th and 83rd percentile, respectively), making them vulnerable to a squeeze lower on any disappointment or USD strength. GBP and JPY are crowded shorts, a positive surprise could trigger a squeeze higher.

    The pain trade: A surprise de-escalation in Middle East tensions combined with a dovish signal from the Fed would trigger a massive short squeeze in USD/JPY and GBP/USD, while simultaneously crushing oil prices and unwinding crowded long positions in AUD and BTC.

  • S&P 500 Sentiment Remains Fragile Despite Record Highs – Monday, 11 May

    Where we are: S&P 500 futures currently trade at 7408.75, up a mere 3.00 points, clinging to a fractional gain of 0.04%. The overnight range has been tight, between 7391.00 and 7420.25. Cash S&P closed unchanged on Friday at 7398.90, so we’re essentially treading water here pre-market.

    What’s driving it: Despite the S&P 500’s recent record-setting run, the underlying narrative remains shaky, with high energy prices and the sustainability of the AI rally weighing on sentiment. US 2-year and 10-year yields both rose by 5bp on Friday, with the 10-year real yield climbing 2bp to 1.96%, creating a headwind for gold and potentially equities. While equities have remained near record highs, fuelled by the recent earnings season, pre-market trading shows some weakness in AI hyperscalers and chip producers, who surged last week.

    • US 10-year real yields are up 2bp on Friday, applying pressure to risk assets.
    • Net non-commercial positioning in S&P 500 futures remains modestly short at -98,581 contracts, although it has increased by 1,941 contracts week-on-week.
    • WTI crude closed up 4.16% on Friday, adding to inflation concerns.

    NY session focus: Focus will be on whether the market can maintain its upward momentum in the face of rising yields and energy prices. Keep an eye on the AI names; any further weakness there could trigger a broader sell-off. Watch 7420.25 as intraday resistance. A break above that could see a test of higher levels, while failure to hold 7391.00 would open the door to a deeper correction. The pain trade here is a continued melt-up fueled by AI enthusiasm, leaving the shorts scrambling to cover.

  • Nasdaq 100 Tightrope Walk Continues – Monday, 11 May

    Where we are: Nasdaq futures are currently trading at 29271.00, down 0.12% on the day, trading within a relatively narrow range of 29227.50 to 29399.25. This is just shy of Friday’s cash close of 26247.08, highlighting the persistent premium in futures. Despite the minor pullback, the index remains near record highs reached last session, with bulls eyeing 30,000 if the AI rally resumes its earlier momentum.

    What’s driving it: A mixed picture is developing, with rising real yields acting as a headwind to tech valuations even as optimism around AI investment persists. US 10-year real yields have climbed to 1.96%, a 2bp rise on Friday. This increase, reflecting expectations of sustained economic growth and tighter monetary policy, puts pressure on high-growth tech stocks. The impact is somewhat offset by the continued focus on AI plays, as demonstrated by Pictet Fund’s allocation of 30% of its cash into AI stocks, and a solid tech earnings season, highlighted by Dan Ives predicting Nasdaq 30,000 as AI rally expands.

    • US 10Y real yields at 1.96% offer less support to high-multiple tech names
    • Pictet Fund’s 30% allocation to AI stocks signals continued conviction
    • Net non-commercial positioning remains modestly long, but only at the 2th percentile of the 52-week range, leaving room for more accumulation on dips.

    NY session focus: Traders will be closely watching the response to any further weakness in AI Hyperscalers and chip producers, after pre-market softness on Monday. Focus will remain on bond yields, especially real rates, to see if the current upward trend continues. A break below 29227.50 in the futures could trigger a test of lower levels. On the upside, a push above 29400 targets a run at 29500. The main event today will be navigating any risk-off headlines regarding energy price spikes or comments on the Iran situation. The pain trade remains a deeper correction in high-multiple tech, particularly if real yields continue to rise.

  • Dow Jones Calm Before the Storm – Monday, 11 May

    Where we are: Dow futures currently trade at 49650, up 34 points on the session, holding near the top of the day’s range (49471-49706). This is a slight positive from the cash close at 49609. The market is treading water as traders await the 08:30 ET data dump, showing little directional conviction after the recent rally to new highs.

    What’s driving it: The underlying US macro picture remains supportive, though perhaps increasingly priced in. The recent earnings-fueled rally has pushed equities to record highs, but there’s a lingering question of whether the AI boom can continue to propel the market higher. The 10Y Real Yield sitting at 1.96%, up 2bp on the week, acts as a headwind for gold and potentially for risk assets as well. Any significant upside surprise on inflation would likely translate to a further repricing of Fed expectations and thus further pressure on equities.

    • Speculator positioning in Dow Jones futures shows a net short of -677 contracts, a rise of 754 on the week. This modestly short stance suggests there’s still room for a squeeze higher if the data surprises to the upside.
    • WTI crude remains elevated at $109.76, which is +4.16% on the week, creating a difficult backdrop for disinflation trades and further complicating the Fed’s path.
    • The 2s10s spread sits at 0.48%, having flattened -1bp on the week, signalling some underlying concern about the growth outlook despite the equity rally.

    NY session focus: All eyes are on the 08:30 ET data releases. Strong figures could solidify expectations for continued Fed hawkishness, potentially triggering a correction. A weaker print would likely fuel further upside in the AI-led tech names, with traders eyeing the 50,000 level on the Dow. Key level to watch is the intraday high at 49706; a break above this could trigger further short covering. The trade that’s working is still long AI, but the trade that’s at risk is anything tied to traditional value or cyclical names. The pain trade is a significant rates sell-off combined with a weaker-than-expected economic print, creating a stagflationary environment that forces a broad-based risk unwind.

  • FTSE 100 Under Pressure as Gilt Yields Spike – Monday, 11 May

    Where we are: The FTSE 100 is currently trading at 22749, down 101 points or 0.44% on the day. The index is trading towards the lower end of its intraday range of 22742-22850, failing to hold ground after the brief overnight bounce. It is underperforming European peers, which are seeing slightly less dramatic declines, and is looking vulnerable as it tests intraday lows.

    What’s driving it: The primary driver of the FTSE’s weakness is the spike in UK gilt yields. The UK 10-year gilt yield has jumped 7 basis points to 5.001%, reflecting concerns about persistent inflation after stronger-than-expected CPI prints in March showed headline inflation at 3.3% and CPIH at 3.4%. The lack of progress on core inflation, remaining steady at 3.2%, suggests that domestic inflationary pressures remain sticky. Global factors are secondary, but US 10-year yields holding steady at 4.393% isn’t offering any relief, while a slightly stronger DXY around 97.87 adds some minor headwinds.

    • UK 10Y Gilt yield at 5.001% (+7bp) — a clear signal that fixed-income investors are demanding higher compensation for inflation risk.
    • UK CPI remains elevated, with the headline number climbing to 3.3% YoY.
    • FTSE underperforming DAX and CAC 40, suggesting UK-specific concerns are at play.

    NY session focus: With no major UK data releases scheduled, the FTSE will likely be driven by broader risk sentiment and US market movements. Watch for any signs of stabilization in gilt yields, which could provide some support. Key levels to watch are 22700 as immediate support and 22850 as resistance. A break below 22700 could trigger further selling. The trade that’s working is shorting the FTSE on any rallies. The trade at risk is long FTSE, hoping for a quick turnaround. The pain trade would be a sudden dovish shift from the Bank of England, reversing the yield spike and triggering a sharp rally.

  • Nikkei 225 Momentum Fades After Recent Surge – Monday, 11 May

    Snapshot: The Nikkei 225 is currently trading at 62418, down 1.24% on the day, retreating from record highs. The primary domestic driver appears to be profit-taking after the recent surge, compounded by surging oil prices stoking inflation concerns.

    • Watch JGB 10Y yield at 2.51%, any further rise may add pressure.
    • Risk of further decline if US equity futures reverse their course.

    Bias into NY: Cautiously bearish. With profit-taking underway and inflation concerns looming, the Nikkei 225 could test lower levels. A break below 62393 would signal further weakness.

  • DAX Faces Pressure as ECB Rhetoric Counters Rate Cut Hopes – Monday, 11 May

    Snapshot: The DAX is currently at 24265, down 68 points or -0.28%. Hawkish comments from ECB’s de Guindos in the Financial Times, suggesting the central bank remains cautious about easing too quickly, are weighing on the index. This counters earlier expectations of accelerated rate cuts following recent inflation data.

    • Watch 24200; break opens path to 24100.
    • Rising crude oil prices and ongoing US-Iran tensions amplify inflation concerns; potential for a risk-off move into the NY session.

    Bias into NY: Expect continued pressure on the DAX, targeting a move toward 24200, if ECB concerns about inflation persist into the US open. The firmer US 10Y yield, currently at 4.393%, could further weigh on sentiment, especially if equities and bonds trade with positive correlation.