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Yesterday offered a moment of relief for some investors amid the Trump euphoria sweeping through the markets. The nomination of Scott Bessent for Treasury Secretary resonated well across investment communities as the man – who runs a macro hedge fund and backs Trump’s tariffs and tax cuts – is seen a ‘measured choice’ for the economy and financial markets, as he would tame spending and adopt a ‘gradual’ approach to imposing tariffs.

But, wait. Investors didn’t have time to fully enjoy the news as Trump said that the US will impose extra 10% tariffs on Chinese goods and 25% levies on all products from Mexico and Canada. Mood in Asia was less cheery. The Mexican peso took a hit, and the USDCAD shortly rallied to 1.4180, hit by the falling oil prices as well, and traded at a level last seen in April 2020.

Elsewhere, US crude slipped below the $70pb level on rising hope of a cease-fire between Israel and Hezbollah, but nat gas futures remain under the positive pressure of tense setup with Russia.

Today, investors will lean on the FOMC minutes to find any hints of what the Federal Reserve (Fed) could do next.

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Last week was marked by an improved sentiment in the US, but not so much in Europe. The US equities had a strong week: the S&P500 rallied 1.68% over the week, Nasdaq 100 gained 1.87% - and that despite Nvidia that finally closed the week flat as the earnings disappointment kicked in with a small delay and costed the company a more than 3% retreat on Friday. The Dow Jones rallied nearly 2%, while the small caps rallied jumped nearly 4.5% on further rush to Trump trades. SPDR’s energy and financial ETFs hit a record high, the US dollar index rallied to the highest levels in two years and of course, Bitcoin – the ultimate Trump trade - flirted with the $100’000 psychological mark and consolidated gains slightly below that level during the weekend.

In Europe, things looked much less encouraging. First of all, the Stoxx 600 index tipped a toe below the 500 mark at the start of the week, and even though Friday ended on a positive note, the move was driven by a ‘bad news is good news’ type of motivation.

Today, the European companies trade with a 40% discount on their S&P500 peers in terms of PE valuations. But the ECB alone could hardly give the European businesses a strong basis to thrive in the long term. Europe needs much more than monetary support to get back on its feet.

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Moodiness due to a lack of a strong post-earnings rally from Nvidia remained short-lived. The shares fell well short of the 8-10% rally that the market was prepared for, and posted a meagre 0.53% rise post earnings. Nvidia couldn’t offer the major US indices a fresh record, as Big Tech companies were mostly sold yesterday. Google lost 4.5% on Department of Justice’s demand to sell Chrome. But both the S&P500 and Nasdaq gained the day after the Nvidia earnings, and consolidate near ATH levels.

In the FX and commodities, the US dollar, oil and gas prices are extending rally amid the mounting geopolitical tensions in Ukraine. The US dollar’s recent rise pushed the EURUSD down the 1.05 cliff yesterday, and Cable extended losses below the 1.26 mark. Yet the solid appreciation of the US dollar, combined to rising energy prices, will likely ring the alarm bell among the European Central Bank (ECB) and the Bank of England (BoE) doves, and get them to tame their dovish expectations. The latter will probably support a recovery in both the euro and sterling once the geopolitical dusts settles. Current levels are more interesting for chasing dip buying opportunities than playing with the bears.

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Nvidia announced another very strong quarter after the bell. They beat earnings expectations and forecasts but two flags have emerged: pressure on profit margins and high concentration of big customers.

Nvidia fell 2.5% in the afterhours trading. Failure to break a record post-earnings, and the rising worries regarding margins and competition could lead to a certain profit taking over the next few sessions.

As such, the S&P500 and Nasdaq futures are in the red this morning, and we could see a deeper retracement from the ATH levels with the lack of support from Nvidia earnings.

Elsewhere, the hawkish shift in Federal Reserve (Fed) expectations continue to give support to the US dollar but the rising hawkishness from the European Central Bank (ECB) and the Bank of England (BoE) will likely slow and potentially reverse the euro and sterling’s selloff against the greenback.

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Geopolitical tensions were on the headlines yesterday after Ukraine fired its first US missile to Russia after having received the green light from the White House following a two-year wait to do so. Gold and treasuries gained and crude oil jumped but remained short of testing the $70pb offers.

Today, sentiment is better and focus shifts to Nvidia earnings due today, after the closing bell.

The expectations are huge, the valuations are high as well. Nvidia could gain or lose around 8-10% in the aftermath of the earning and trigger a 1-2% rally or selloff in the S&P500.

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The week kicked off on a bullish note, as the recovery in US treasuries, and the retreat in US yields help boost appetite in major US indices. Tesla gained on news that there could be an accelerated framework for fully self-driving cars, while Nvidia weakened on reports that Blackwell chips overheat.

In currencies, the US dollar weakened and gave room to other majors to breath, but the pullback could be short-lived.

In energy, US crude posted a 3% rally yesterday, but the bulls could find the $70pb offers hard to clear, as the amply global supply / weak global demand outlook remains supportive of the bears. Solid resistance is eyes between $70/72pb range.

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US retail sales and the inflation data came in higher than expected last week, and the Federal Reserve (Fed) Chair Jerome Powell said that the US economy is strong enough and that there is no urge for rushing to rate cuts. The US yields and the dollar rallied, equities gave back gains.

This week, the economic calendar is light, and attention shifts to big US retailer and Nvidia earnings!

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Federal Reserve’s (Fed) Jerome Powell, who leads a team that started cutting the interest rates with a 50bp point in September by fear that the US jobs market would deteriorate quickly and added another layer of 25bp cut last week, said that ‘the economy is not sending any signals that [they] need to be in hurry to lower the rates’. Maybe, the plans have changed after Trump’s election on rising inflation risks due to pro-growth policies and tariffs.

US yields and the US dollar continue to push higher, major peers test important technical levels, crude oil remains under pressure, while US indices start worrying about a hawkish readjustment in Fed expectations.

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US inflation came in parallel to expectations, confirming that headline inflation in the US stagnated near 0.3% level for a third month, the yearly figure rebounded from 2.4% to 2.6% as expected, while core inflation remained stuck at 3.3%. The short-end of the US yield curve eased on expectation of further Federal Reserve (Fed) cut in December, but the long-end is pushing higher on bets that inflation won’t ease to 2% if the Fed cuts defying the inflationary Trump policies.

The US dollar pushes higher, the US dollar is now in or near the overbought territory against most majors. Big caps consolidate, small caps come under pressure, while the European indices don’t take advantage of weaker euro.

In energy, oil made a short attempt to the upside yesterday on a surprise decline in US oil inventories last week, but gains remain limited. Numerous failures to clear the $72.85pb Fibonacci resistance keeps the market in the hands of the bears, with the ambition to pish the price of a barrel to $65pb target.

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