Nasdaq 100 Erases Weekly Loss as Gold and Oil Take Breathers

Also 30-year T-bond, gold, crude oil and Australian dollar futures

1. Nasdaq 100 E-mini futures (/NQ): +0.91% 

2. 30-year T-bond futures (/ZB): +0.27% 

3. Gold futures (/GC): -0.34% 

4. Crude oil futures (/CL): -0.23% 

5. Australian dollar futures (/6A): +0.71% 

Crude oil and gold prices are taking a breather today, giving the beleaguered bond market some breathing room. The decline in yields across the curve may be proving to be a tailwind for U.S. equity markets, which are up across the board and led by the Nasdaq 100, which has erased its losses on the week. Elsewhere, the U.S. dollar is down everywhere once again. Several Federal Reserve policymakers are set to speak today, leaving crumbs of event risk for traders to deal with as the week winds down. 

Equity markets are holding overnight gains, with Nasdaq 100 futures (/NQM4) up 0.62% this morning. Initial jobless claims data came in hotter than expected with a gain of 221,000 for the week ending March 30. That’s an encouraging sign for rate traders ahead of tomorrow’s non-farm payrolls report. Tomorrow’s risk should help dictate where equity markets go over the short term after traders booked profits at the close of the first quarter last week. The options market for stocks isn’t showing signs that traders are betting on a correction as stocks hover at all-time highs, which suggests some confidence among bulls.  

Long-term bond yields are showing signs of topping as bond prices gently rise after a rapid descent earlier this week amid persistently strong economic growth and stubborn inflation. Tomorrow’s non-farm payrolls report will be key for direction, although traders appear to have already priced in a strong jobs report. That said, if we meet or miss expectations, it could offer more relief. Traders expect to see 200,000 jobs added for March, which would be down from recent months.  

Gold prices (/GCM4) are pulling back this morning, down 0.31%, from all-time highs following a blistering rally that has left some traders scratching their heads. The strength in precious metals might be coming from an expected pullback in real yields amid signs of strong inflation and a bond market that looks like it might be bottoming. The story for gold going into this weekend is the same as other assets,. Tomorrow’s jobs report will play a key part for the metal’s path forward. 

Crude oil (/CLK4) saw its recent strength lose steam this morning despite OPEC reportedly stepping up enforcement efforts for its members regarding supply cuts. The cartel said that Russia would switch to production cuts rather than just curbing exports and that other members would slow production this quarter. 

Continued strength in Chinese markets and in base metals are proving to be formidable tailwinds for the Australian dollar (/6AM4), which is now up nearly 1.5% this month, having erased all its losses since the end of January. The decline in U.S. Treasury yields is weighing on the U.S. dollar, which is down for the third consecutive day. The March U.S. nonfarm payrolls report tomorrow will be the defining moment of the week for FX.  

Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime, Monday-Thursday. @cvecchiofx

Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater

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