S&P 500, 30-year T-Bond, Gold, Crude Oil and Euro Futures

Traders have started to sell down Treasuries, precious metals remain in the tank, and crude oil is taking a breather today

This Morning’s Five Futures in Focus

1. S&P 500 e-mini futures (/ES): -0.02%
2. 30-year T-bond futures (/ZB): -0.52%
3. Gold futures (/GC): +0.10%
4. Crude oil futures (/CL): -0.65%
5. Euro futures (/6E): +0.28%

Swirling concerns around the Chinese property market and renewed fears that European central banks won’t be able to back off their rate hike cycles led to another disappointing overnight session. The optimism seen in the later U.S. hours on Wednesday has not carried over, with long-end bonds selling off (again), while precious metals remain in the tank. But the shift higher in bond yields globally has led to a pushback against the U.S. dollar, which reached a fresh yearly high yesterday.

A late-day rally on Wednesday may have insulated U.S. equity markets from bigger losses, but that enthusiasm—predicated on news of a potential continuing resolution to keep the federal government from shutting down—has not carried over into today. It’s a quiet day overall, with none of the four major U.S. equity index futures trading more than +/-0.2%. Month-end and quarter-end flows should become more influential over the next two trading sessions.

Déjà vu in the bond market? It seems so. As with Monday, Tuesday and yesterday, risk-off sessions in Asia and Europe helped prop up demand for bonds. However, with the U.S. session on approach, traders have started to sell down Treasuries. The long-end remains ground zero, with 30s (/ZBZ3) and ultras (/UBZ3) leading the sell-off. Today, four Federal Reserve speakers, including Fed Chair Jerome Powell at 4 p.m. Eastern Time, promise to inject binary event risk over the course of the day.

Gold prices (/GCZ3) are unchanged this morning despite another wave of selling in government bonds. Following yesterday’s sell off, gold is on track to record the largest weekly percentage decline since October 2022. Investors continue to digest the “higher for longer” narrative that manifested after the Fed’s rate announcement. One bright spot for gold is China, where investors are paying a premium for the metal, with Shanghai prices commanding a nearly 7% premium vs. London, according to Bloomberg. 

U.S. crude oil (/CLZ3) is taking a breather today as investors weigh supply concerns against the threat of higher interest rates. Yesterday, the U.S. Energy Information Administration (EIA) reported a 2.2-million-barrel decrease in oil stocks, beating the 320,000-barrel draw analysts expected. Meanwhile, U.S. natural gas futures (/NGX3) are moving higher after Europe’s key supplier Norway announced there would be capacity cuts, although European stockpiles sit at healthy levels, which leaves a conflicting outlook for prices. 

The dollar is taking a breather against its major peers despite higher rates across much of the Treasury curve. Despite the divergence in the economic outlooks between Europe and the U.S., it looks like traders are ready to take some profits on dollar bets. However, comments from Fed Chair Powell, who is due to speak today, could influence the dollar's direction and reverse course for the euro, depending on how hawkish he comes across. Australian dollar futures (/6AZ3) are up about 0.64%, putting it on track for its best day since Sept. 11. 

The Japanese Yen (/6JZ3) is holding up slightly in the green after Eisuke Sakakibara, a former foreign exchange official, commented on intervention levels for the yen, Sakakibara, otherwise known as Mr. Yen, stated that the 155 level should cause concern and could result in some type of intervention, according to a Bloomberg report. 

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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