Nasdaq 100 Extends Rally After Trump Announces EU Tariff Pause

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

1. Nasdaq 100 E-mini futures (/NQ): +1.88% 
2. 10-year T-Note futures (/ZN): +0.27% 
3. Gold futures (/GC): -2.01% 
4. Crude Oil futures (/CL): -1.53% 
5. Japanese Yen futures (/6J): -1.28% 

The half-life between tariff announcements continues to shorten. Last week’s announcement by President Donald Trump of 50% tariffs on the European Union was unwound over the weekend, paving the path for a rebound in risk appetite — buy America — across the board. Stocks are trading higher led by the Nasdaq 100, while bond yields are lower at the long-end of the curve. The US dollar has perked up, particularly against the euro and the Japanese yen, while gold prices have cratered. The “boy who cried wolf” mentality that defined markets with respect to tariffs in January and February seems to be back. 

Traders cheered the news released over the weekend and pushed equities higher to start the week. Nasdaq 100 futures (/NQM5) rose nearly 2% in early trading following a long holiday weekend. While macro risks remain a threat to growth, consumer confidence numbers pointed to a rebound in sentiment, with May’s consumer confidence index rising to 98.0, according to the Conference Board. Tesla (TSLA) rose nearly 5% after Elon Musk said he would shift his focus back to the business and away from politics. Okta (OKTA) is set to report earnings after the bell today. Later this week, traders will digest reports from Nvidia (NVDA) and Costco (COST). 

Bond yields fell across the curve as concerns over the “sell America” trade eased. The positive news on tariffs between the US and the European Union helped restore some confidence in the Treasury markets. 10-year T-note futures (/ZNM5) rose 0.20% through early trading. The advancing tax bill in the US is posing some concern about the deficit, which has helped push yields higher alongside trade concern. Those fears are easing this week. Traders are waiting for results from a two-year note auction scheduled for today.  

Gold prices (GCM5) were down over 2% this morning. The losses come after a winning week for precious metals. The improved market sentiment is pushing traders out of the metal, which is usually seen as a hedge against uncertainty. If news about trade measures continues to improve, it could have a negative impact on gold prices. Alternatively, a breakdown in negotiations would likely have the opposite effect. A stronger dollar is also posing a headwind for the yellow metal.  

Crude oil prices (/CLM5) fell today despite the easing of tensions in trade between the US and the European Union. An OPEC+ meeting later this week is expected to result in the group deciding to release more oil for July. However, traders have expected this move by OPEC, and it is likely already priced into the market. Meanwhile, Tehran has signaled it is ready to compromise on a deal with the US, which would likely result in the removal of US sanctions on Iran.  

News that Japan will consider cutting issuance of longer-dated bonds amid a sharp rise in yields was weighing on Japanese yen futures (/6JM5) to start the week, dropping over 1% this morning. The improved risk sentiment in US markets also weighed on the currency, as traders cheered the news on tariffs. However, upbeat PPI (producer price index) data from Japan signaled support for rate hike bets for the Bank of Japan (BOJ) later this year, which may limit further selling of the currency.   

Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. #@fxwestwater
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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