Russell 2000 Struggles as Trump Tariff Talk Lifts Dollar, Yields

Also, 10-year T-note, gold, crude oil and British pound futures

1. Russell 2000 E-mini futures (/RTY): -0.61% 
2. 10-year T-note futures (/ZN): -0.03% 
3. Gold futures (/GC): +0.5% 
4. Crude oil futures (/CL): +0.2% 
5. British pound futures (/6B): -1.12% 

Today’s price action has produced mixed markets. The December U.S. ADP employment change reading was softer than expected (+122,000 vs. +140,000), while weekly U.S. jobless claims indicated sustained strength (+201,000 vs. +218,000). Nevertheless, a report from CNN regarding President-elect Donald Trump declaring a national emergency to justify across-the-board tariffs is helping keep U.S. Treasury yields elevated, which in turn is helping the U.S. dollar test its highs for 2025. 

The sustained push higher at the long-end of the yield curve continues to hobble the Russell 2000 (/RTYH5) more than the other major indexes. Notably, regional banks are down over 1% year-to-date, while /RTYH5 is down just -0.25% this year. The spot VIX is up a stick, trading over 18. Elsewhere, Nvidia (NVDA) CEO Jensen Huang poured cold water on the quantum computing bubble, saying that truly impactful quantum computers were “decades” away. Several recent highflyers in the space are down more than 20% at the start of the session. 

Trump’s tough tariff talk continues to be a catalyst for rates and FX, and today's price action underscores that reality. The report from CNN helped spark a move higher in yields, which are getting no help from expectations around the Fed’s rate cut cycle nor from participants in recent auctions—yesterday’s 10-year note auction was middling at best. Today’s 30-year bond auction (/ZBH5) will be in focus, as will the December Federal Open Market Committee (FOMC) meeting minutes.

Tariff talk and aspirations of U.S. territorial expansion across North America don’t seem to be bothering metals or energy, unlike the other asset classes. Gold prices (/GCG5) remain rangebound, trapped within the confines of a symmetrical triangle that has been forming over the past six months. Silver prices (/SIH5) are trying to retake their uptrend off their summer and fall 2023 swing lows. Alongside the break of the multi-month downtrend in copper prices (/HGH5), metals are showcasing a high degree of resiliency in the face of considerable cross-asset headwinds. 

Energy markets remain rather quiet, all things considered, as measures of volatility have not budged significantly for either crude oil (/CLG5) or natural gas (/NGG5) prices. Trump’s talk of “drill baby, drill” amid a reversal of President Joe Biden’s offshore drilling ban impacting 625 million acres can’t be done by executive order but instead requires Congressional action. The short-term trajectory for global oil supply remains tight, even if the demand side leaves much to be desired amid China’s ongoing deflation and Europe’s sluggish growth. 

As Trump’s tariff talk rankles rates, the U.S. dollar is pushing to some of its highest levels of 2025. But attention today is not on the usual suspects like the euro (/6EH5) or the Japanese yen (/6JH5), but instead on the British Pound (/6BH5). U.K. Prime Minister Keir Starmer may be having his Liz Truss lettuce moment, with U.K. Gilt yields surging to their highest levels since 1998 while Sterling crumbles. Fiscal crisis may be emerging across the pond. 

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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