Nasdaq 100 Resumes Post-FOMC Climb; Another Yentervention?

Also, 30-year T-bond, silver, crude oil and Japanese yen futures 

1. Nasdaq 100 E-mini futures (/NQ): +0.83% 

2. 30-year T-bond futures (/ZB): -0.57% 

3. Silver futures (/SI): -1.09% 

4. Crude oil futures (/CL): +0.08% 

5. Japanese yen futures (/6J): +1.65% 

A second consecutive day that saw the U.S. equity markets fell by more than 0.5% in the final 10 minutes of trading did little to shake investors’ confidence in the wake of the May Federal Open Market Committee (FOMC) meeting.

U.S. equity futures are up across the board, although the macro storm isn’t over yet. The April U.S. jobs report is still on the docket for tomorrow. Bonds are selling off again as rates markets calcify expectations around a December rate cut.

Elsewhere, attention is across the Pacific as it appears that a second intervention this week in the Japanese yen occurred late in the trading day on Wednesday. 

Nasdaq futures rise

Nasdaq futures (/NQM4) were up almost 1% ahead of the opening bell. Traders digested the latest labor market data this morning, which showed 204,000 initial jobless claims for the week ending April 27 versus an expected 212,000 print.

Apple (AAPL) earnings are due after the bell today and after that the focus will shift to tomorrow morning’s non-farm payroll report. That leaves plenty of event risks ahead of the weekend. 

Treasury yields move up

Treasury yields moved higher along the middle and long-end of the curve as traders digested the latest economic data. The 30-year T-Bond futures (/ZBM4) fell 0.57%.

Speculation has grown recently that yields have topped, especially now that the Fed announced it will taper the size of quantitative tightening (QT).

The Treasury will resume auctions next week when we see several potentially high-impact auctions, with three-year and five-year notes and a 30-year bond auction on the schedule. 

A setback for metals?

Higher U.S. Treasury yields, and a generally stronger U.S. dollar may be weighing on the metals complex on Thursday.

Technical support is beginning to break in both gold (/GCM4) and silver prices (/SIN4), a sign that a deeper setback may be transpiring.

For the latter, /SIN4 has started to trade below the December 2023 high, a suggestion that the recent breakout has been exhausted.

Crude oil inventories build

Crude oil futures (/CLM4) traded steady after falling yesterday as signs that oil demand is softening were revealed by the Energy Information Administration's weekly inventory report.

Crude stocks rose 7.3 million barrels, beating the expected +1 million barrel build that analyst expected. Energy traders expected Middle East tensions to keep prices afloat, but the drop in implied demand seen in the EIA’s report appeared too much for the market to stomach.  

Now, traders expect the U.S. to step in and start buying oil for the Strategic Petroleum Reserve (SPR), with prices below $80/barrel. It’s not clear if that will be enough to support prices if demand continues to drop.

Meanwhile, OPEC is getting ready to meet, although it's unknown if they will extend production cuts beyond June.  

A yentervention could be coming

Will we see another intervention by Japan’s Ministry of Finance?

That is what some traders are thinking after Japanese yen futures (/6JM4) surged early this morning. The currency is up 1.65%—its largest daily percentage gain since December.

Japanese policymakers might be trying to send a message to speculators to back off the short positions, which have accumulated rapidly over the past few months. Tomorrow will bring data from the Commodity Futures Trading Commission on positioning in currency futures, revealing how funds have been trading over the latest reporting week.  

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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