S&P 500 Gaps Open Lower as Trump Threatens New Canada, EU Tariffs

Also, 30-year T-bond, silver, natural gas and British pound futures

1. S&P 500 E-mini futures (/ES): -0.28% 
2. 30-year T-bond futures (/ZB): -0.28% 
3. Silver futures (/GC): +0.71% 
4. Natural gas futures (/NG): +2.9% 
5. British pound futures (/6B): -0.24% 

News broke over the weekend that President Donald Trump would be seeking 30% tariffs against the European Union and Mexico. It came on the heels of threats of 50% tariffs against Brazil and 35% tariffs against Canada, all of which would go into effect on Aug. 1. Naturally, the “TACO trade” is at the front of everyone’s minds, but the harsh reality is that markets must freak out before Trump chickens out. Anti-fiat assets are continuing to outperform, with silver hitting its highest level since 2011 and Bitcoin surging to a new all-time high – even as US Treasury yields push higher at the long-end of the curve. 

It’s more of the same for stocks on the other side of the weekend, with tariff headlines producing a modest drift lower in both the S&P 500 (/ESU5) and Nasdaq 100 (/NQU5). Traders seem to retain the mindset that the tariffs won’t ultimately be implemented in the form or fashion that’s been threatened by Trump, so why panic? Volatility remains low, with IVRs holding in the low teens for both major US equity index futures. Vixpiration is on Wednesday. 

No meaningful Treasury auctions this week put into focus two themes: Trump’s tariffs; and the Federal Reserve. The June US inflation report tomorrow may come and go without much of an impact on the latter, insofar as rates markets are already discounting greater than a 93% chance of no rate cut later this month. So we bring our focus to the former, which seems to be in tension with the trajectory of fiscal spending following the passage of Trump’s tax plan. 

Silver prices started the session higher before trimming gains ahead of the New York opening bell. The metal is coming off a winning week after it rose more than 5% to push prices to a 14-year high. Bloomberg reported that silver-backed exchange-traded funds (ETFs) for silver rose over 2,500 tons since February. Traders seem to prefer the white metal vs. bullion amid renewed tariff threats, which have been driven higher in the first half of the year.  

Crude oil prices (/CLQ5) rose over 1% early today to put the commodity at three-week highs. Traders are anticipating new US sanctions on Russia with the White House seemingly frustrated over Moscow’s reluctance to resolve the war with Ukraine. China released customs data that showed oil imports rose to 12.14 million barrels per day, reaching the highest levels since August 2023. Oil bulls are now eyeing the 70 handle.  

Emerging US dollar strength over the course of today’s session now sees the greenback up across the board save against the Japanese yen (/6JU5). The ratcheting higher of US Treasury yields is proving supportive for the dollar this go-around, unlike the tariff episodes in March and April. Granted, the market is different in July, with traders retaining one of the largest net-short positions in the US dollar in several years. That’s per the report from the Commodity Futures Trading Commission (CFTC) on the Commitments of Traders (COT). And it’s the most negative sentiment environment in decades, according to a variety of money manager surveys. Meanwhile, the Australian dollar (/6AU5) and British pound (/6BU5) are the leaders to the downside today.

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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