Nasdaq 100 Drops on Latest Tariff News; Fed Meets on Wednesday

Also, 10-year T-note, gold, crude oil, and Japanese yen futures 

1. Nasdaq 100 E-mini futures (/NQ): -0.99% 
2. 10-year T-note futures (/ZN): +0.06% 
3. Gold futures (/GC): +2.61% 
4. Crude oil futures (/CL): -1.27% 
5. Japanese yen futures (/6J): +0.92% 
   

Another weekend of chaotic tariff headlines has put markets in a defensive posture at the start of the week. Traders are selling off stocks, buying Treasuries from 2s to 10s, and lifting gold prices back above 3300. In an interview yesterday, President Donald Trump noted that he has no plans to speak with Chinese President Xi Jingping this week, dampening expectations of meaningful progress on the trade war front.

Elsewhere, OPEC+ announced plans to boost production by 411,000 for the second consecutive month, leading to a volatile open for oil prices (which have otherwise traded higher over the course of the day). 

Trade war fears are back in focus this week after President Trump announced tariffs on movies made outside of the United State over the weekend. Nasdaq 100 contract (/NQM5) fell 0.99% in early trading. Netflix (NFLX) traded 3% lower and Disney (DIS) was down 1.4% shortly after the opening bell. While negotiations are ongoing, according to the White House, the announcement on tariffs marked an escalation at a time when traders were expecting progress towards deals. Amazon (AMZN) was down 2% on the news. Howard Hughes Holding (HHH) rose 5% after it was announced that Pershing Square would buy 9 million newly issued shares of the real estate company.  

Treasuries rose on the shorter side of the curve to start the week, with 10-year T-note futures (/ZNM5) up about 0.06% in early trading. The moderation comes after heavy selling late last week. Prices are trading at the 50-day simple moving average on a continuous contract basis. The Treasury Department will auction three-year notes today before auctioning off 10-year notes tomorrow. Traders will be watching how foreign demand holds up for the 10-year note auction tomorrow.  

Gold (/GCM5) is back in an environment where safe-haven flows are boosting its appeal. The tariff announcement sent traders back into the metal as stocks moved lower. Gold prices (/GCM5) rose over 2.5% early Monday. The move brought prices back above the 9-day exponential moving average after bouncing from the 21-day EMA. A weaker dollar is helping gold’s advance as rate traders prepare for the Federal Reserve’s interest rate announcement and remarks from Fed Chair Jerome Powell.  

Crude oil prices (/CLM5) moved sharply lower overnight after OPEC+ decided to further rollback voluntary production cuts. The group will release more supply onto the market in June, marking the third straight month of unwinding the 2022 cuts. The cartel, led by Saudi Arabia, is attempting to force members, notably Kazakhstan and Iraq, back into compliance with production quotas. Prices trimmed heavier overnight losses to trade about 1.5% lower this morning.  

The "sell America" trade is very much alive in FX markets, with the U.S. dollar down against each of its major counterparts. In a fairly typical ‘risk-off’ fashion, the Japanese yen (/6JM5) is leading to the upside alongside the move higher in gold. The Fed meeting this week may help the greenback refocus market attention on the near-term rate cut path, which has become less dovish over the past week. 

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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