The Asian session market saw a modest recovery following the S&P 500’s near-bull market advance on Monday. Hong Kong stocks experienced a notable rise of 1.3%, driven primarily by the substantial gains of Contemporary Amperex Technology, which surged upwards of 18% on its initial trading day. Despite Moody’s release of a downgrade, broader risk assets largely maintained their upward trajectory, although cautious sentiment remained evident as safe haven assets, such as gold, witnessed a bid. Optimism surrounding a 90-day pause in US-China trade negotiations appeared to be waning, with market participants increasingly focused on potential announcements related to other trade agreements aimed at bolstering overall sentiment.
Significant attention was directed toward ongoing discussions between India and the United States regarding a three-part trade deal. India’s efforts to finalize an interim agreement before July, when anticipated reciprocal tariffs from the US are set to take effect, were a key focus, with insiders suggesting a targeted completion date. Meanwhile, Japan’s top trade negotiator, Ryosei Akazawa, was preparing for a third round of talks in the US scheduled for as early as this week. The Japanese finance minister was also arranging a meeting with US Treasury Secretary Scott Miller this week to address critical issues, including currency dynamics, which had previously contributed to a strengthening of the Japanese yen. Furthermore, bilateral trade negotiations between Vietnam and the United States commenced in Washington DC on Monday, with discussions expected to continue until Thursday.
In China, major banks implemented further reductions in deposit rates, a response intended to incentivize greater consumer spending amidst a slowdown in the domestic economy. Retail sales data released yesterday underscored the need for these measures. Market watchers anticipated that developments and announcements surrounding these trade deals – alongside any new information regarding the truce in the Russia-Ukraine conflict – could significantly impact market sentiment and potentially trigger further bullish rallies within risk assets.
Heading into the European open, the S&P 500 futures experienced a decline of 0.2%, suggesting that the six-day rising trend might be nearing its end. European market contracts strengthened by 0.5%, bringing the pan-European STOXX 600 index to a high of seven weeks at 0.2%. The DAX index reached a fresh all-time high just above the 24,000 handle, although trading displayed slight downward adjustments. Utility stocks gained 1.1%, with Portugal’s EDP Renovaveis (ELI:EDPR) increasing by 3.5% following a positive rating upgrade from Deutsche Bank from “hold” to “buy.”
On the foreign exchange front, the US dollar remained stable at 144.75/yen after reaching 144.66 on Monday, marking its weakest level since May 8th. The dollar index decreased by 0.1%, following a 0.6% decline in the previous session. The Australian dollar experienced a fall of 0.5% to 0.6423, relinquishing a significant portion of its Monday’s 0.8% gain. This decline followed the Reserve Bank of Australia’s (RBA) decision to lower its main cash rate to 3.85%, a two-year low, driven by a weaker global outlook and gradually decelerating inflation within Australia. The British pound remained steady at 1.3353, while the euro held flat at 1.1249.
Economic data releases in Europe were limited, with ECB policymakers providing the primary focus. Looking ahead, Canadian CPI data and commentary from Federal Reserve policymakers are anticipated to introduce volatility to the market. The performance of currency markets is being closely monitored, with OANDA Labs’ data providing valuable insights.
The DAX index demonstrated a noteworthy achievement, reaching a new all-time high just above the 24,000 level. Initial European trading saw the index experience minor adjustments, potentially due to cautious sentiment and the possibility of profit-taking. Although the daily candle closed above the 24,000 benchmark, observations of recent price action and the previous all-time high revealed a three-day consolidation period preceding the subsequent surge. The market’s reaction to this historical event remains to be seen. The period-14 Relative Strength Index (RSI) indicated an overbought condition, with immediate support resting at 23,750 before the 23,471 level becomes a critical area of interest. A move beyond 24,000 will likely attract attention at key round numbers, including 24,250 and 24,500. TradingView.com provided a detailed daily chart of the DAX index, illustrating its performance from May 20th, 2025.
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