Markets are on high alert due to quarter-end rebalancing

On Monday, markets closed higher, supported by positive geopolitical developments that bolstered momentum. Nevertheless, caution persisted as investors awaited clearer economic and political signals. Global equities experienced notable gains, while cryptocurrencies recovered from earlier losses, aided by eased tensions between the U.S. and Iran over the weekend. Notably, President Trump announced that peace talks with Iran are scheduled to resume on Tuesday.

The U.S. dollar (USD) softened broadly on Tuesday as investors digested inflation data consistent with expectations and adopted a cautious stance ahead of the upcoming June employment report. This also occurred amid portfolio rebalancing ahead of month-end. Despite this, the USD is on track to record its strongest monthly performance in nearly a year, underpinned by resilient economic data and a hawkish Federal Reserve.

Nasdaq Ends Five-Day Losing Streak

The Nasdaq 100 rebounded on Monday following last week’s technology sector weakness. Shares of major tech companies advanced as investors capitalized on AI-related buying opportunities after last week’s sell-off. Sentiment in Nasdaq futures is expected to remain stable, supported by mild bullish momentum linked to portfolio rebalancing. Last week, the Nasdaq Composite declined by 4.6%, marking its worst weekly performance since the spring correction in AI stocks. A key factor was OpenAI’s indication that its IPO may be delayed until 2027, partly due to SpaceX’s share price falling 30% from its post-IPO peak.

Expect a choppy and noisy trading session

Quarter-end rebalancing may drive volatility, potentially benefit equities, commodities and boost cryptocurrencies such as Bitcoin. Expect sharp and amplified price movements from the European open through the North American session, particularly as quarter-end liquidity risk intensifies with each release. Additionally, the forthcoming economic data from the U.S., particularly regarding consumer confidence and JOLTS job openings, will be crucial to monitor, as these figures could significantly impact market stability.

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