Nasdaq 100, 2-Year T-Note, Copper, Crude Oil and Euro Futures

This Morning’s Five Futures in Focus

1. Nasdaq 100 E-mini futures (/NQ): -0.35%
2. Two-year T-Note futures (/ZT): +0.01%
3. Copper futures (/HG): -0.20%
4. Crude oil futures (/CL): +0.03%
5. Euro futures (/6E): -0.31%

It’s more of the same for the world's markets after the September Federal Open Market Committee (FOMC), whereby stocks are following bonds lower. The push higher in U.S. Treasury yields is likewise spilling over into precious metals and FX futures, almost boosting the U.S. dollar across the entire complex. If anything, price action today is shaping up to resemble what happened on Wednesday and Thursday of last week.

The brief reprieve at the end of last week has not carried in the next for the four major U.S. equity market futures. While losses have been modest thus far, the Russell 2000 (/RTYZ3) is leading the way lower once again. It's likely the culprit is the renewed push higher by U.S. Treasury yields. A thinner holiday trading session may be around the corner, which can lead to slippery markets absent a meaningful catalyst to help stabilize prices.

More pressure on the long end of the U.S. Treasury bond curve is proving to be problematic for broader markets, once again, at the start of the week. 30s (/ZBZ3) and ultras (/UBZ3) are the big losers on the session, leading to another bout of steeping in the yield curve: the 2s10s spread has narrowed to -59-bps.

Copper prices (/HGZ3) are moving lower this morning as traders digest renewed fears out of China after the country’s property sector woes were rekindled following Evergrande’s debt restructuring. Meanwhile, U.S. rate hike bets are forcing bond holders to sell, which is also placing more pressure on the demand-sensitive economy. For now, copper prices probably will main subject to headline risks out of China. Traders are also watching new U.S. home sales data due out tomorrow.

Crude oil is little changed this morning as traders mull the threat of higher U.S. interest rates and what it means for oil. Russia’s fuel ban on diesel and gasoline was loosened on Monday. Moscow will allow for the export of fuels intended for maritime vessels, according to Reuters citing a government document. Energy traders are waiting for U.S. inventory data due tomorrow as risks headlines in China play out.

Traders are bidding the dollar higher Monday morning as bonds sell off, pushing yields higher on the threat of more U.S. rate hikes following last week’s FOMC announcement. Euro futures (/6EZ3) are pushing into new yearly lows as economic growth concerns plague the currency’s outlook, while Australian dollar futures (/6AZ3) wither alongside deteriorating market sentiment. Reignited property sector woes out of China amid Evergrande's debt restructuring is also driving dollar strength on a declining yuan. Euro traders are waiting for comments from ECB’s Philip Lane ahead of consumer confidence and inflation figures due later this 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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