Nasdaq 100 Leads Tepid Rebound as Energy Struggles

Also five-year T-note, gold, natural gas and Australian dollar futures

1. Nasdaq 100 w-mini futures (/NQ): +0.21% 

2. Five-year T-note futures (/ZF): +0.16% 

3. Gold futures (/GC): +0.70% 

4. Natural gas futures (/NG): +1.95% 

5. Australian dollar futures (/6A): +0.35% 

Treasuries climbed this morning as traders prepared for tomorrow’s consumer price index (CPI) report, which should sway bets on Federal Reserve interest rate cuts. Market bets show traders believe there will be only two rate cut bets this year but given the recent moves in the bond market, we appear to be at a baseline with the new expectations baked in. That said, if markets bets swing back toward three rate cuts, we could see that drive a risk-on tone across markets. Elsewhere, the dollar and crude oil prices eased as negotiations in the Middle East prepare for a fresh round of ceasefire talks between Israel and Hamas.  

Nasdaq futures move higher  

Nasdaq futures (/NQM4) are leading equities higher this morning. Traders are waiting for tomorrow’s consumer price index report, which will provide the most recent data on inflation. On Bloomberg TV, James Bullard, the former St. Louis Federal Reserve president, said three rate cuts remains the base case scenario for markets. After inflation data crosses the wires, traders will shift their focus to earnings season.  

Bonds are trading higher this morning, extending a move that started overnight in Asian and European markets. The five-year T-Note futures (/ZFM4) is up 0.16%, although its underlying yield remains near the highest since November. If tomorrow’s inflation report shows some progress, yields may ease further. The Treasury is set to auction off three-year notes today.  

Gold is continuing a streak of strength and trading near all-time highs. This week, China reported it bought 160,000 troy ounces of gold in March, highlighting the appetite for the metal among central banks. Gold traders are also watching inflation data closely. Speculators raised their bullish bets on the metal, according to Friday’s report from the Commodities Futures Trading Commission (CFTC).  

Natural gas futures (/NGK4) climbed this morning by about 1.95%. We are exiting the demand-heavy withdrawal season, which typically eases pressure on stocks and allows inventory to build up. However, production has been going down, according to the Energy Information Administration, and the chances for hotter-than-average weather this summer could make for some volatile swings in prices that are hovering near multi-year lows.  

A softer dollar, lower Treasury yields, and rising risk sentiment are all contributing to a stronger Australian dollar (/6AM4), up 0.35% this morning. Tomorrow’s CPI report will play a key role for dollar strength and overall market sentiment, which puts the Aussie dollar in a key position to play any shifts in those underlying drivers. /6A futures are nearing their January highs as optimism in the currency builds.  

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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