Stocks, Metals and Currencies Are Mixed and Bonds Are Down as Tariff Rates Increase
Stocks, Metals and Currencies Are Mixed and Bonds Are Down as Tariff Rates Increase
Also, 30-year T-bond, silver, natural gas and Japanese yen futures
- S&P 500 E-mini futures (/ES): +0.27%
- 30-year T-bond futures (/ZB): -0.52%
- Silver futures (/SI): +0.48%
- Natural gas futures (/NG): -3.83%
- Japanese yen futures (/6J): +0.13%
The turn through the middle of the week was greeted by news that the US and Japan had agreed to a new trade arrangement that would avoid 25% tariffs on Aug. 1. President Donald Trump announced the deal hours after formally acknowledging similar deals with Indonesia and Singapore. To say traders are unenthused wouldn’t be a stretch: Stocks are mixed, bonds are down, metals are mixed and, you guessed it, currencies are mixed. The reality is effective tariff rates are increasing and free trade is receding. Attention now turns to other major trading partners like Canada, Mexico and the European Union.
| Symbol: Equities | Daily Change |
| /ESU5 | +0.27% |
| /NQU5 | -0.1% |
| /RTYU5 | +0.76% |
| /YMU5 | +0.62% |
S&P 500 futures (/ESU5) rose 0.27% in early trading after Trump announced a trade deal with Japan. The news was a welcome sign that signaled positive momentum in trade negotiations ahead of the Aug. 1 deadline. GE Vernova (GEV) rose over 13% after reporting earnings and strengthening its guidance outlook while also accounting for tariff impacts. Hasbro (HAS) fell more than 3% despite a positive earnings report that saw the toymaker beat estimates. Texas Instruments (TXN) fell over 11% after the chipmaker offered soft guidance. Tesla (TSLA) and Alphabet (GOOGL) will report after the bell today.
| Strategy: (44DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
| Iron Condor | Long 5900 p Short 6000 p Short 6700 c Long 6800 c | 67% | +762.50 | -4237.50 |
| Short Strangle | Short 6000 p Short 6700 c | 71% | +2375 | x |
| Short Put Vertical | Long 5900 p Short 6000 p | 86% | +462.50 | -4537.50 |
| Symbol: Bonds | Daily Change |
| /ZTU5 | -0.04% |
| /ZFU5 | -0.13% |
| /ZNU5 | -0.22% |
| /ZBU5 | -0.52% |
| /UBU5 | -0.67% |
Bonds saw some selling this morning as equities advanced following the overnight announcement of a trade deal between the US and Japan. 30-year T-bond futures (/ZBU5) fell about 0.5% in early trading. The prospect of more trade deals on the horizon softened the outlook for inflation, which is supportive for a dovish Federal Reserve. However, bonds were already 1% higher on the week, and the risk-on tone injected back into the market is sapping demand for US debt.
| Strategy (65DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
| Iron Condor | Long 106 p Short 108 p Short 118 c Long 120 c | 60% | +546.88 | -1453.13 |
| Short Strangle | Short 108 p Short 118 c | 66% | +1390.63 | x |
| Short Put Vertical | Long 106 p Short 108 p | 84% | +281.25 | -1718.75 |
| Symbol: Metals | Daily Change |
| /GCQ5 | -0.71% |
| /SIU5 | +0.48% |
| /HGU5 | +3.37% |
Silver prices (SIU5) advanced this morning while gold prices (GCQ5) fell. The former is benefiting from a growth-on tilt following the trade news, with the metal likely being a beneficiary of higher economic activity, given that it is used in industry. Meanwhile, concerns about the Fed’s independence remain a concern, which could keep pressure on the dollar. That would benefit precious metals, but silver would likely be the winner in an environment where the global economy avoids recession.
| Strategy (64DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
| Iron Condor | Long 34 p Short 35 p Short 44 c Long 45 c | 64% | +1305 | -3695 |
| Short Strangle | Short 35 p Short 44 c | 72% | +5375 | x |
| Short Put Vertical | Long 34 p Short 35 p | 84% | +460 | -4650 |
| Symbol: Energy | Daily Change |
| /CLQ5 | -0.38% |
| /HOQ5 | -0.39% |
| /NGQ5 | -3.83% |
| /RBQ5 | +0.44% |
Natural gas prices (/NGQ5) fell almost 4% in early trading to put the commodity at the lowest level since November after falling below the July swing low. The three handle is now the area for bulls to defend. Production is now near 109 billion cubic feet per day, according to Bloomberg data — which is near a record high. Meanwhile, weather models show hot weather across much of the United States over the next several weeks, but the Northeast — where demand is concentrated — is avoiding the worst of the heat wave.
| Strategy (64DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
| Iron Condor | Long 2.3 p Short 2.4 p Short 3.9 c Long 4 c | 67% | +290 | -710 |
| Short Strangle | Short 2.4 p Short 3.9 c | 75% | +1640 | x |
| Short Put Vertical | Long 2.3 p Short 2.4 p | 84% | +120 | -880 |
| Symbol: FX | Daily Change |
| /6AU5 | +0.57% |
| /6BU5 | +0.01% |
| /6CU5 | 0% |
| /6EU5 | -0.23% |
| /6JU5 | +0.13% |
The US-Japan trade deal has provoked two-way action in the Japanese yen (/6JU5), with one of the knock-on effects a rumor that Japanese Prime Minister Shigeru Ishiba would resign following the weekend’s disappointing election results for the LDP-Kameito coalition. But there is a more significant development happening in currencies: Volatility in the sector is creeping up: the British pound (/6BU5) and the Canadian dollar (/6CU5) have implied volatility ranks (IVRs) approaching 50.
| Strategy (44DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
| Iron Condor | Long 0.0066 p Short 0.0067 p Short 0.0071 c Long 0.0072 c | 61% | +375 | -875 |
| Short Strangle | Short 0.0067 p Short 0.0071 c | 68% | +775 | x |
| Short Put Vertical | Long 0.0066 p Short 0.0067 p | 80% | +225 | -1025 |
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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