Nasdaq 100, 30-year T-Bond, Silver, Crude Oil, and British Pound Futures

The Fed's decision rippled around the world

This Morning’s Five Futures in Focus:

1. Nasdaq 100 e-mini futures (/NQ): +0.30%
2. 30-year T-bond futures (/ZB): +0.19%
3. Silver Futures (/SI): -0.02%
4. Crude oil futures (/CL): +2.60%
5. British pound futures (/6B): +0.01%

A sea of red is enveloping markets on Thursday in the wake of the Federal Reserve and Bank of England rate decisions.

The Fed’s decision to hold rates but remove two rate cuts from its 2024 projections rippled around the world, with global equity markets selling off and long-end bond yields shooting higher. Meanwhile, with the Bank of England throwing in the towel on its rate hike cycle, the U.S. dollar has emerged as a clear winner across the board. Only two futures are trading at or above water today: crude oil (/CLV3) and the Japanese Yen (/6JZ3).

The repricing of the cost of money between Thursday and Friday has had a deleterious effect on U.S. equity markets, with all four futures in the red. Led lower by the Nasdaq 100 (/NQZ3), significant technical breakdowns are starting to come into focus: the S&P 500 (/ESZ3) is breaking down out of its triangle; /NQZ3 is heading towards range lows; and the Russell 2000 (/RTYZ3) is testing the waters of a head and shoulders neckline breakdown.

The long end of the curve is once again in focus, as the ‘higher for longer’ mindset of the Federal Reserve is provoking a repricing across the entire bond market. Yields are up across the curve, but the most damage is being down in the 30s (/ZBZ3) and the ultras (/UBZ3). The rising cost of money, as it were, is proving to be a significant obstacle for all other assets in the market.

Silver prices (/SIZ3) are about 3% lower this morning, which puts the metal on track for its largest daily percent decline since June. A stronger dollar and rising Treasury yields are weighing on the rate-sensitive metal following the Federal Reserve’s hawkish pause that indicates higher-for-longer rates. The Bank of England’s move to hold rates tanked /6BZ3 and underpinned the dollar further.

U.S. crude oil prices (/CLZ3) are rising following a few days of modest selling. Traders are assessing news out of Russia, where Moscow announced a ban on diesel and gasoline exports. European crack spreads rose overnight on the news, and U.S. heating oil futures (/HOV3) are also moving higher. Energy traders are waiting for natural gas inventory figures from the EIA today.

The FX markets are feeling the Fed’s decision to eliminate rate cuts from its 2024 projections. Coupled with the BOE’s decision to buck market expectations and instead keep rates on hold, the British Pound (/6BZ3) is emerging as a clear loser on Thursday. But the growth-sensitive Australian dollar (/6AZ3) is the leader to the downside, as the prospects of a more significant slowdown in global growth become that much more likely if interest rates, particularly in the U.S., stay high(er) for longer.

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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