Nasdaq 100 Leads Rebound as Oil Steadies Near 52-Week Low

Also, 10-year T-note, silver, crude oil and Japanese yen futures

1. Nasdaq 100 E-mini futures (/NQ): +1.07% 

2. 10-year T-note futures (/ZN): -0.38% 

3. Silver futures (/SI): -0.19% 

4. Crude oil futures (/CL): +1.28% 

5. Japanese yen futures (/6J): -0.54% 

An early August redux did not happen. Disappointing U.S. jobs data on Friday had little spillover impact on Asian markets overnight, and the deja-vu disappointment is giving risk assets breathing room at the start of the week. The Nasdaq 100 is leading the rebound, with all four equity markets trading higher. Bonds yields are higher as traders hone on a 25-basis-point (bps) interest rate cut next week. Energy prices remain pressured, with crude oil barely holding above its 52-week low established Friday. Elsewhere, the U.S. dollar is the top performer among the major currencies.  

No major collapse in Japanese stocks or worries about the carry trade on the other side of the August U.S. jobs report has led to a relief rally on the other side of the weekend. Measures of volatility are coming down, with the VIX off by more than two points; the Nasdaq 100 (/NQU4) has seen its IVR drop from 43 to 34 today alone. The AI theme will see a significant test today with the Apple (AAPL) “Glowtime” event that could unveil the iPhone 16, Apple Watch 10 and next generation AirPods. 

Bonds are priced for the equivalent of nine 25bps rate cuts through the end of next September, a pace of easing that suggests the Federal Reserve will be taking a measured approach when they get started next week. Indeed, the odds of a 50-bps rate cut next week have dropped from a high of 54% last week to a more modest 27% today; a further reduction in cut odds going into the September Federal Open Market Committee (FOMC) meeting would likely prove a headwind for bonds. Treasury auctions are back on the calendar this week, with three-year notes (tomorrow), 10-year notes (Wednesday) and 30-year bonds (Thursday) on tap. 

Metals are displaying surprising resiliency at the start of the week, given the headwinds of a stronger U.S. Dollar and higher Treasury yields. Nevertheless, volatility measures remain elevated, and in the cases of gold (/GCZ4) and silver (/SIZ4), recent trading ranges are holding firm. 

Energy markets are trying to establish some signs of recovery in the wake of the OPEC+ announcement last week, but little traction has been made. At the time of writing, crude oil prices (/CLZ4) were fading their gains, having established a fresh 52-week low at the end of last week. Markets are reading through the OPEC+ production hike delay as a sign that global demand is weak; indeed, China is experiencing its longest streak of deflation since the late-1990s.  

If it was believed that the July U.S. jobs report sparked capitulation in the carry trade, the lack of reaction in Japanese stocks and the Japanese yen (/6JU4) to the August U.S. jobs report underscores how that catalyst has been exhausted in the short-term. Instead, the yen is trading in a more typical rates-sensitive, safe haven fashion. It’s rallying when stocks fall and bonds rally and falling when stocks rise and bonds fall.   

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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