Nasdaq 100, 10-year T-Note, Silver, Crude Oil, and Euro Futures

This Morning’s Five Futures in Focus

1. Nasdaq 100 E-mini futures (/NQ): -0.33%
2. 10-year T-note futures (/ZN): +0.16%
3. Silver futures (/SI): -0.83%
4. Crude oil futures (/CL): +0.92%
5. Euro futures (/6E): -0.37%

Energy prices are on the march once more, with a ripple effect seen across asset classes on Tuesday. Fresh yearly highs in crude oil prices (/CLV3) have started to stir concerns over higher inflation pressures, allowing both gold (/GCZ3) and silver (/SIZ3) to take on their elusive role of inflation hedges. Meanwhile, U.S. equity indexes are down across the board, with the Nasdaq 100 (/NQZ3) leading the way lower after being the top performer on Monday.

U.S. equity index futures are pointing to a lower cash equity open on Tuesday as a rebound in the U.S. dollar has weighed on sentiment. Mixed U.S. Treasury yields aren’t helping either, as the rise in energy prices is leaving rate-sensitive (via inflation sensitivity) assets in a difficult place.

Moreover, fresh concerns over the state of earnings are in play after the disappointing results from Oracle (ORCL) last night. But once again, like yesterday, none of the four major U.S. equity index futures are seeing substantial moves; none of fallen more than -0.50% at the time of writing.

While attention has quickly shifted off the Bank of Japan's surprise over the weekend, renewed focus on the potential impact of higher energy prices is sparking concerns that central banks may not be able to throw in the towel on elevated interest rates. If energy prices continue to rise over the course of the session, it may not be long before the entire curve trades lower on the day, as rising inflation expectations should be reflected at the long end of the curve (/ZNZ3, /ZBZ3, and /UBZ3).

Silver (/SIZ3) sank this morning due to a stronger dollar led by weakness in the euro. Precious metals investors are watching tomorrow’s U.S. inflation report, which will dictate Fed rate hike bets for next week. While core inflation is seen holding steady, the headline figure is expected to increase 0.6% from the month before. Rate traders are only pricing in a 7% chance of a 25-basis-point hike for the September 20 meeting, but if inflation comes in above already-hot expectations, that could fuel expectations and drive rate-sensitive silver prices lower.

Crude oil (/CLV3) traded to the highest level of the year this morning, with prices gaining $0.68 per barrel, or 0.78%, after the German economy showed signs of improvement, according to the ZEW investor confidence gauge. While that won’t be enough to ward off a recession in Europe, it is enough to push oil prices up given the tightness on the commodity’s supply side. API crude oil stocks are due today, with traders expecting a two-million-barrel draw for the week ending Sept. 8.

It’s a consistent theme today, whereby economies that have struggled under the weight of higher energy prices are seeing their currencies weaken the most on Tuesday. Notably, the two stagflation problem children, the Eurozone and the U.K., are seeing the British pound (/6BZ3) and the euro (/6EZ3) struggle by nearly equal amounts. But it’s also been unwelcome news for the Japanese Yen (/6JZ3), which has seen intense pressure since the start of 2022 under the weight of higher energy costs; Japan imports over 90% of its energy, so higher oil and gas prices undercut the country’s terms of trades meaningfully.

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

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.

Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.