S&P 500 Shuffle Continues Amid 25% Tariff Talk, Russia-Ukraine ‘Peace’

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

1. S&P 500 E-mini futures (/ES): -0.26%
2. 10-year T-note futures (/ZN): +0.07%
3. Gold futures (/GC): +0.49%
4. Crude oil futures (/CL): +0.43%
5. Japanese yen futures (/6J): +0.84%
   

U.S. equity markets are continuing their sideways shuffle near all-time highs as traders contend with an onslaught of headlines regarding tariffs and significant realignments in geopolitics. Commodities have become a haven destination of sorts, with metals and oil supported throughout the week thus far. The U.S. dollar is continuing to show signs of rolling over, with the Japanese yen emerging as the top performer this week. Attention is shifting to Europe, where German elections this week could have a profound impact on how the Russia-Ukraine war is resolved.

Disappointing earnings from Walmart (WMT) have dampened the mood in U.S. equity markets today, which were otherwise trading higher through the Asian and European sessions. Comments from President Donald Trump regarding balancing the budget, pushing forward a plan to cut the Department of Defense’s budget by 8% per year for each of the next five years, has proved detrimental to sentiment as the morning has unfolded: All four U.S. equity indexes have turned into the red, with losses accelerating around the cash equity open.

Treasuries, on the other hand, are enjoying commentary from Washington, D.C., that government spending may back away from deep, sustained deficits that have largely defined the post-COVID era. Auctions over the past two weeks have been rather weak, with falling bid-to-cover ratios and results that have tailed consistently. Learn more: How to Read a Treasury Bond Auction.

Gold prices are hovering near all-time highs as the metal moves slightly higher in today’s trading session. The metal hit new highs overnight, but some profit-taking was evident in the early U.S. trading session. This morning’s U.S. jobless claims data showed the labor market remains stable, which could help keep rate cut bets subdued over the short term, given the lack of other economic data due this week.

Crude oil prices (/CLH5) rose about 0.5% in early trading, which extended gains from the previous session. The move higher comes despite a report released yesterday by the American Petroleum Institute (API) that showed a 3.3 million barrel build in crude inventories for last week. The Energy Information Administration (EIA) will release crude oil and natural gas inventory data today. Those figures could put pressure on prices if inventories come in above expectations. However, the market remains concerned that the recent disruption in oil supply from Kazakhstan will keep some supply from the global market.

Japanese yen futures (/6JH5) rose over 1% this morning to extend gains from earlier in the week as inflation pressures in the Japanese economy increase rate hike bets for the Bank of Japan (BOJ). Japanese bond yields are now at decade-level highs, which has reduced the yield differential vs. their U.S. counterparts. A broader tone of risk aversion in the market amid fresh fears about tariffs from the U.S. and their potential impact on the global economy are also helping to support the currency. Meanwhile, expectations for Japan’s labor talks have risen, with analysts now expecting a 5% pay increase.

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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