* Iran denied it reached out to the US about peace talks

* Dollar dips from multi-month highs on Middle East optimism  

* Natural gas prices sink, crude off its highs as Iran fears ease

* Nasdaq sharply higher as tech leads stock market gains

FX: USD fell back to the downward trendline from the late November top as oil prices fell off their intraday highs, which also weren’t fresh cycle peaks. Brent actually formed a doji candle denoting indecision. Improved sentiment saw some of the haven qualities due to America’s energy independence fade. This came after a New York Times report that Iran reached out to the CIA indirectly a day after the conflict started with an offer to discuss terms. This was denied later but may have put a top in oil. Strong ISM Services data was looked through.

EUR printed a relatively narrow day with prices still holding below the 200-day SMA at 1.1665. Sentiment driven dollar weakness helped the world’s most popular currency pair. But expectations for ECB action also softened with just a 20% chance of a rate hike by the bank by December. President Trump  threatened to halt all trade with Spain after it refused to allow America to use joint air bases, though this was resolved later.

GBP underperformed which put it mid-pack this week among its peers. The 100-day SMA is above at 1.3394 with the 200-day at 1.3442. Tuesday’s Spring Statement was a quiet affair as the Chancellor sticks to her self-imposed rule requiring a primary balance by 2029-30.

JPY strengthened mildly with the major off near six-week highs. Again, dollar weakness has helped with few domestic drivers.

US stocks: The S&P 500 added 0.78% to close at 6,870, the Nasdaq was 1.51% higher at 25,094 and the Dow Jones settled higher by 0.49% at 48,739. The S&P 500 was back above its 100-day SMA at 6,835 with the 50-day at 6,905. The Nasdaq remains below both those momentum indicators. All sectors were green apart from three with Consumer Discretionary and tech the big winners. Energy, Consumer Staples and Materials were in the red. Palantir enjoyed its sixth straight day of gains while Amazon led the Mag 7 stocks with Apple underperforming. Moderna jumped 15% as it reached a $2.5 billion settlement. Broadcom reported after the closing bell and edged higher after the earnings release. The chip giant logged higher sales as AI demand remained strong while authorising a $10 billion buyback. CoreWeave jumped 7.7% as it signed a multi-year deal with Perplexity to help power a new generation of services.

Asian stocks: Futures are mixed. APAC stocks extended losses on the widening Middle East conflict at the time. The ASX 200 slumped on commodity related weakness with the stronger GDP not helping. The Nikkei 225 fell below 54,000 with materials and mining the big laggards. The Hang Seng and Shanghai Comp sunk in line with other regional markets after mixed Chinese PMI data while focus also turned to the Two Sessions.  

Gold got a small bid on haven demand as the conflict in the Middle East reached its fifth day. Modest upside was seen on the NYT reports as the USD eased. Bullion could now confirm to its more usual drivers including support from central banks and softer dollar.

Chart of the Day – Dow rebounds but underperforming other indices

The Dow slid to levels last seen in early December on Tuesday and below the 100-day SMA at 48,162. But a bullish hammer candle formed, as we pointed out, and ‘Turnaround Tuesday’ saw modest gains as markets steadied amid the Middle East tumult. Prices still remain below the 50-day SMA at 49,138 and the index has modestly underperformed the Nasdaq this week with battered Tech doing better than more traditional defensive sectors which had previously been doing well. The Dow needs to get above the 50-day SMA and preferably the late February top at 49,815 to reassert some bullish momentum.