Nasdaq 100 Starting CPI Week on Softer Footing

Also, two-year T-note, copper, natural gas, and Australian dollar futures

1. Nasdaq 100 e-mini futures (/NQ): -0.62%
2. Two-year T-note futures (/ZT): +0.06%
3. Copper futures (/HG): +0.63%
4. Natural gas futures (/NG): -1.11%
5. Australian dollar futures (/6A): -0.33%

The start of an important macro week is off to softer trading, with each of the U.S. equity index futures in lower territory following significant reversals in semiconductors, namely Nvidia (NVDA), on Friday.

With the February U.S. inflation report due tomorrow, bonds are mixed across the curve. Despite a mostly stronger U.S. dollar, metals are continuing what has become an extended push higher.

Stocks slip

Equity markets slipped to start the week, with the risk-sensitive Nasdaq 100 futures (/NQH4) down 0.53% as traders await data on inflation.

The consumer price index (CPI) is expected to come in at 3.7% for February from the year before on a core basis—a measure that excludes energy and food prices. Despite some weakness in last week’s jobs report, traders want to see more progress on inflation to secure the view that the Fed will cut rates later this year. It’s likely a make-or-break report for equity traders this week.

Bonds drop

Short term bonds are moving lower Monday morning as bond traders position themselves for a data-heavy week.

On top of inflation data, the Treasury has a busy week of auctions on the schedule, with a three-year note auction starting off the week today. A 10-year note, and 30-year bond auction will follow on Tuesday and Wednesday.

Copper rises

A resilient U.S. economy coupled with recent signs that Chinese fiscal and monetary authorities will boost support for the world’s second-largest economy is helping to lift copper prices (/HGK4) to start the week, with prices up 0.7%.

The price premium for copper in China should help to support demand with higher imports of foreign copper. In the first two months of the year, China’s copper imports were up 2.6% from a year ago, according to government trade data.

The case for copper also relies on the chance for Fed rate cuts, which could make tomorrow’s CPI report a key driver.

Natural gas goes lower

Natural gas prices (/NGJ4) started the week lower on Monday despite a shift in weather forecasts, which show some cooler temperatures across the U.S. East Coast.

While encouraging for energy bulls, it is likely a little too late in the season to illicit a response, given that we are nearly out of the winter withdrawal season, even with the recently announced production cuts form several U.S. producers.

Last week’s data from the Commitments of Traders report (COT) showed that shorts trimmed their position for a second week.

Australian dollar drops

The risk-sensitive Australian dollar futures (/6AH4) are following the lead from other risk assets, trending about 0.3% lower to start the week.

The currency hit a two-month high following Friday’s jobs report that helped lift market sentiment, although prices are still well off recent lows. Data out of China on money supply and lending due tonight may shift the calculus for the Aussie, but other high-impact prints, including the U.S. inflation data may also move the needle.

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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