US Stocks Close Mixed as Investors Digest Updates – Nasdaq down 0.76%
US stock markets finished mixed in trading yesterday as investors continued to digest the latest developments in the Middle East, with the Trump administration announcing further sanctions on countries trading with Iran. The ongoing geopolitical uncertainty continued to keep investors cautious, with the Dow Jones managing to gain 0.26% to close at 53,417, while the S&P 500 fell 0.28% to 7,652 and the Nasdaq dropped 0.76% to 25,980.
US Treasury yields moved lower following another report suggesting the Treasury Department could increase its bond buybacks further. The 2-year yield edged 0.4 basis points lower to 4.231%, while the 10-year yield fell 3.8 basis points to 4.696%.
The US dollar pushed higher off its recent lows, with the USD Index gaining 0.19% to 98.99. The move came despite the softer Treasury yields, as ongoing geopolitical concerns continued to provide some support for the greenback.
Oil prices moved lower despite the latest escalation in US pressure on Iran, with Brent crude falling 2.50% to $92.03 a barrel and WTI declining 2.35% to $85.01. Traders appear to be looking beyond the latest threats for now, with the market continuing to assess the potential impact on actual supply rather than simply reacting to the political rhetoric.
Gold continued to outperform, rising another 1.06% to $4,651.27 an ounce as the precious metal pushed further into fresh multi-month highs. Lower Treasury yields and continued demand for defensive assets have provided a supportive backdrop for gold, while the ongoing geopolitical uncertainty has added another layer of safe-haven demand.
Canadian Dollar in Focus for FX Traders as Trade War Escalates
The Canadian dollar has come under renewed pressure this week as the latest deterioration in US-Canada trade relations raises concerns over the outlook for the Canadian economy. The Loonie fell around 0.6% against the US dollar on Monday, with USD/CAD rising to around 1.3850 – the 200-day moving average on the daily chart – after Washington imposed new 50% tariffs on a range of Canadian goods.
The move follows the collapse of trade negotiations between Ottawa and Washington, with the Trump administration introducing tariffs on roughly US$20 billion of Canadian imports. Canada has responded by pledging a dollar-for-dollar retaliation.
The Canadian dollar had been showing signs of strength earlier this month, as oil prices rose, reaching a three-month high against the US dollar, but the renewed trade tensions have quickly shifted sentiment back in favour of the US dollar.
With negotiations now stalled and both sides taking a tougher stance, the outlook for the Loonie is likely to remain closely tied to developments in Washington and Ottawa. Unless there are signs of a renewed negotiating process, further trade escalation could keep pressure on the Canadian dollar and leave USD/CAD biased higher in the near term. Support now sits around recent lows near 1.3730, while initial resistance is just above 1.3900.
Quiet Calendar Day Ahead for Traders
It is a relatively quiet day on the economic calendar, meaning markets are likely to remain particularly sensitive to any fresh geopolitical headlines. There is very little of note on the calendar in the Asian time zone; however, the London session does see the release of the latest German IFO Business Climate data (exp. 87.3) early in the day. We do have the first major US data drop of the week out early in the New York session as well, with the CB Consumer Confidence (exp. 90.3) due out, but overall, traders are expecting any fresh updates, especially if more details are forthcoming, to provide the major stimulus for fresh moves.
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