U.S. Markets Push Higher; Elections Overseas Fail to Upset Pound or Euro

Also, 10-year T-note, silver, crude oil and Euro futures

1. Nasdaq 100 E-mini futures (/NQ): +0.12% 

2. 10-year T-note futures (/ZN): -0.06% 

3. Silver futures (/SI): -1.07% 

4. Crude oil futures (/CL): -0.78% 

5. Euro futures (/6E): +0.05% 

U.S. equity markets are pushing modestly higher on the other side of the holiday week, with a full five days of trading (as well as an unobstructed calendar until Labor Day). A pullback in oil prices, thanks to hopes of an Israel-Hamas ceasefire, may be giving breathing room to assets elsewhere: Long-end bond yields are easing back and the U.S. dollar is weaker as market-derived measures of inflation expectations are moving lower. Overseas, an overwhelming victory by the Labour Party in the U.K. and a hung parliament emerging in France are doing little upset either the British pound or the euro.

Nasdaq futures edged higher to start the week (continuing the trend of new all-time highs) as traders look ahead to testimony from Federal Reserve Chair Jerome Powell and inflation figures due later this week. Markets, via Fed Funds futures, continue to price in a cut by September, but those bets have plenty of time to shift, especially if the downward trend in inflation reverses. Banks will kick off the quarterly earnings season later this week, with Citigroup (C), JPMorgan (JPM) and Wells Fargo (WFC) set to report Friday.  

U.S. Treasuries fell across the curve to start the week as bond traders digest election results in France. This week’s testimony from Fed Chair Powell has the potential to push some volatility into the bond markets, along with several potentially high-impact auctions, including 3-, 10- and 30-year auctions. The June U.S. inflation report due Thursday is expected to cross the wires at 3.1% from a year ago. A miss there poses the biggest landmine for Fed interest rate cut bets.   

Silver prices (/SIU4) softened this morning following last week’s 7.2% gain. The metal reestablished a bullish technical structure during that move, breaking a series of lower highs and lower lows from the May swing high. Silver bulls will look to keep prices above the 31 handle to maintain the bullish momentum. Plenty of event risks could influence precious metals prices, which could make it a volatile week for gold and silver prices. Friday’s data from the Commodity Futures Trading Commission showed silver speculators cut short bets on a net basis.  

Crude oil prices (/CLQ4) fell about 1% Monday morning as traders assess ceasefire talks that are taking place to end the nearly year-long war in Gaza. The fact that prices are down despite a hurricane making landfall in Texas and disrupting key ports appears bearish for the commodity that traded last week to the highest levels since April. Traders will be waiting to hear how the storm affects refineries over the next few days, but if there isn’t significant damage, oil prices could continue to sell as geopolitical risks subside.  

Short term risks to the euro were averted after the French election, which disappointed the polls that expected a far-right majority to take power. A hung parliament means the risk of extreme policies being enacted will be averted for now, but uncertainty remains with no clear part in power. Macron will likely have to form an alliance government to get business going in parliament. Euro futures (/6EU4) trimmed overnight losses to trade nearly flat at the New York open. Volatility is starting to contract in FX markets overall after the elections in recent days.

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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