Nasdaq 100 Holds Modest Gains as Gold Breaks Key Level

Also, 10-year T-note, gold, natural gas and Japanese yen futures

1. Nasdaq 100 E-mini futures (/NQ): +0.29% 
2. 10-year T-note futures (/ZN): +0.06% 
3. Gold futures (/GC): -1.63% 
4. Natural gas futures (/NG): -3.98% 
5. Japanese yen futures (/6J): +1.16% 

Normalcy continues to settle in for financial markets in the wake of the US-China trade war truce announced last week. The spot VIX is back under 20, while gold prices have started to crack below 3200. The fear trade is truly finished, and sentiment appears to be returning to where it was in February: Cautious optimism about deregulation and taxes (animal spirits) constrained by measured pessimism about trade policy (growth and inflation). 

Traders continued to buy US equity futures this morning following a mostly positive session in Asia-Pacific markets. Technology stocks were leading once more, with Nasdaq 100 futures (/NQM5) up 0.20% ahead of the opening bell. Nvidia (NVDA) rose almost 3% higher in pre-market trading, boosted by news that Saudi Arabia would purchase about 18,000 high-end chips. Meanwhile, UnitedHealth Group (UNH) bounced ahead of the bell after its abysmal session yesterday when the stock fell 17.79% to the lowest level traded since October 2020. 

Treasury futures were little changed this morning as the market’s appetite for risk moderated from yesterday’s trading session. Rate traders are now pricing in only two rate cuts through the end of the year. 10-year T-note futures (/ZNM5) were up 0.03%, while 30-year T-bond futures (/ZBM5) rose 0.03%. Meanwhile, bond traders have their ear to the ground in Washington where lawmakers are negotiating Trump’s budget bill. The bill is expected to add to the deficit, which would likely require the Treasury to issue more debt, particularly on longer-tenure bonds. The expectations of increased supply going forward may hold back prices.  

Gold prices (/GCM5) fell nearly 2% to bring its weekly loss to almost 5% as a positive shift in sentiment degrades the metal’s outlook. The weekly loss is on track for the worst performance since June 2021. Today’s move puts prices below the 3,200 level, signaling a breakdown of a technical level marked by the early May swing low. A weak dollar isn’t offering any help to precious metals today, with the move driven primarily by the market’s improved appetite for risk.  

Natural gas prices (/NGM5) fell over 3.5% to extend losses from the previous session. Prices pierced below the 9- and 21-day exponential moving averages (EMAs) as downward momentum accelerates. The move lower comes after prices rallied from late April to early May. A mild weather forecast for the United States is reducing the demand for gas. S&P Global Commodity Insights data showed deliveries to liquified natural gas (LNG) facilities fell 1.3 billion cubic feet per day last week, highlighting weak demand from abroad.  

The Japanese yen (/6JM5) rose over 1% this morning. The currency got a strong boost after Japanese inflation data showed the Bank of Japan will likely have enough reason to continue raising rates this year. At a time when the Fed is still expected to cut rates later this year, it bodes well for the yen’s outlook. The producer price index (PPI) for Japan posted a fourth monthly gain above the 4% mark. Meanwhile, trade talks between the US and Japan are ongoing.  

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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