Nasdaq 100 Futures Back Down amid Gold Surge

Also, two-year T-note, gold, natural gas and Japanese yen futures

1. Nasdaq 100 E-mini futures (/NQ): -0.49%
2. 2-year T-note futures (/ZT): -0.07%
3. Gold futures (/GC): -0.48%
4. Natural gas futures (/NG): -3.15%
5. Japanese yen futures (/6J): +0.12%

A macroeconomic-heavy calendar over the coming days has traders taking a cautious approach at the start of the week; watchlists are effectively a sea of red. The Reserve Bank of Australia and Bank of Canada meet in the coming days, while Q3 2023 GDP reports will be released for Australia, the Eurozone and Japan. But the U.S. calendar is conspicuously absent for most of the week until Friday, when the November U.S. jobs report will be released. The calendar is also bare of Federal Reserve speakers, now that the Federal Open Market Committee (FOMC) is in its communication blackout period ahead of its Dec. 13 meeting.

U.S. equity markets are starting mixed to mostly lower on Monday, perhaps unnerved by the spastic beginning of the futures session open with a shift to safe havens immediately upon the resumption of trading. But there does appear to be somewhat of a rotation in the works, with the Russell 2000 (/RTYZ3) moving higher as the Nasdaq 100 (/NQZ3) leads to the downside. /RTYZ3 has outperformed /NQZ3 by +3.5% through the first two days of December.

Volatility in commodity markets overnight—a surge and then sharp reversal in precious metals futures in particular—is leaving traders a bit more cautious about bonds at the start of the trading week. Yields are higher across the curve, with 10s (/ZNZ3) and 30s (/ZBZ3) leading the way to the downside. Issuances are limited this week, with just a handful of short-dated T-bill auctions over the coming days.

Gold prices (/GCG4) hit an all-time high overnight before surrendering gains to trade around 2077 shortly before the opening bell. Traders are betting on the precious metal as rate hike odds will continue to cool. That is helping bolster confidence in gold to counter economic growth concerns that could stall earnings and leave the equity markets vulnerable. Besides the U.S. jobs report later this week, there is little economic data that could materially shift the rate outlook.

Falling European gas prices are dragging the U.S. benchmark (/NGF4) lower today, as below-average demand in Europe continues amid warm seasonal weather across much of the continent. That is cutting export demand for U.S. liquefied natural gas (LNG), which largely goes to Europe. Despite that, the U.S. continues to dominate the export market, with the Energy Information Administration (EIA) reporting last week that the U.S. was the world’s largest exporter in the first half of this year.

Japanese yen futures (/6JZ3) rose modestly this morning after last week’s rally put the currency at the highest levels since early October. Speculation that the Fed is finished hiking and a less dovish stance from the Bank of Japan (BoJ) has helped lift the Yen over the last month. However, according to Friday’s commitments of traders (COT) report, speculators are betting the rally will fizzle, with leveraged funds dropping 2,888 contracts while shorts outnumber longs by nearly a 3-to-1 ratio.

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  

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