Nasdaq Rises as PPI Data Bolsters Fed Rate Cut Outlook

Also, 30-year T-bond, gold, crude oil and euro futures

1. Nasdaq 100 E-mini futures (/NQ): +0.25% 
2. 30-year T-bond futures (/ZB): +0.50% 
3. Gold futures (/GC): +1.82% 
4. Crude oil futures (/CL): -0.84%  
5. Euro futures (/6E): +0.73% 

The prospect of the US imposing unilateral tariffs in two weeks dampened sentiment overnight in the equity futures market, but prices managed to trim losses in early US trading. Factory-gate prices remained modest in May, with the producer price index rising 0.1% from the previous month, mirroring this week’s inflation data. The data on wholesale prices reinforces the narrative that tariff price pressures have yet to show up in the economy. Meanwhile, traders are focusing on the bright side of trade negotiations as an outline for a trade deal between the US and China advances. Still, time is running out before the threat of tariffs returns, and this could cause some volatility to appear in the market if no notable progress is made before the end of next week.  

Nasdaq 100 futures (/NQM5) rose 0.25% this morning. The move comes after equities posted their first losing session of the week. Boeing (BA) dropped 5% in the first hour of trading after a 787 Dreamliner crashed after takeoff in India. Oracle (ORCL) rose over 13% after the company posted rosy results after the bell yesterday. Meanwhile, traders are watching for signs the Trump administration will extend pauses on reciprocal tariffs.  

Bond futures continued to move higher this morning, with 30-year T-bond futures rising 0.50% in early trading. Traders are waiting for the 30-year bond auction scheduled for 12 p.m. CDT to assess how demand is holding up for US debt. Yesterday’s 10-year note auction saw good results, which assuaged concerns in the bond market as traders worry about buyers shying away from bonds issued by countries with rising debt.  

Gold prices (/GCQ5) rose nearly 2% this morning, pushing prices up to highs traded earlier this month. The drop in Treasury yields and a weaker US dollar helped to fuel the buying in gold. Meanwhile, geopolitical tension concerning Iran is helping to fuel uncertainty in the market and in turn pushing gold prices higher. If prices can break above 3,427.7, then bulls may press forward to attack recent highs from early May.  

Crude oil prices (/CLN5) fell after yesterday’s gain of 4.88%, which marked the largest one-day percentage gain for the commodity since October of last year. The US started to evacuate non-essential personnel from its embassy in Iraq. Some see the development as a precursor to a potential military strike on Iran, likely by Israel. Iraq would serve as a prime location for Iran to retaliate against military action.  

Euro futures (/6EM5) rose into fresh three-year highs as the US dollar weakened amid positive news flow on a trade deal between the United States and China. Meanwhile, the European Central Bank (ECB) appears to be moving into a more hawkish position while at the same time bets increase on a Federal Reserve cut in interest rates. This morning’s producer price index (PPI) data from the US helped to reinforce those rates cut bets. Meanwhile, ECB members are reiterating that the European economy is moving into a balanced state.  

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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