Nasdaq 100 Notches a Fresh Monthly High After Jobless Claims and PMIs

Also, 10-year T-Note, Copper, Natural Gas, and Japanese Yen Futures

1. Nasdaq 100 E-mini futures (/NQ): +0.42% 

2. 10-year T-note futures (/ZN): -0.32% 

3. Copper futures (/HG): -0.72% 

4. Natural gas futures (/NG): -3.16% 

5. Japanese yen futures (/6J): -0.84% 

Good news is still good news for financial markets, as this morning’s U.S. data releases have not raised the specter of recession fears. Weekly U.S. jobless claims were in-line, while the August U.S. S&P Global PMI (purchasing managers’s index) reading came in largely better than expected, except for the fact that the manufacturing PMI slid deeper into recession; traders would be remiss to forget that the July U.S. ISM (Institute for Supply Management) manufacturing PMI kickstarted the Aug. 1 to 5 sell-off predicated on recession fears and that the Federal Reserve was ‘behind the curve.’ Higher U.S. Treasury yields have buoyed the U.S. dollar, which may be weighing on commodities, which are otherwise having fairly modest pullbacks today. 

Nasdaq contracts (/NQU4) rose today after yesterday’s Federal Open Market Committee (FOMC) minutes all but confirmed that a rate cut is coming in August. Peloton (PTON) rose over 10% in pre-market trading after the company reported its first sales increase in over eight quarters. Snowflake (SNOW) fell nearly 10% ahead of the bell despite reporting an earnings beat, as investors decided to focus on soft guidance provided by the software maker.  

Treasuries fell across the curve despite U.S. labor market data that showed more cracks in the economy as the Fed prepares to cut rates next month. Still, bonds are up on the week and yields are down. The Treasury will auction off 30-year Treasury inflation protected securities (TIPS) today.  

Copper prices (/HGU4) fell today, dropping 0.72% in early morning trading. The metal remains higher on the week after gaining some support from labor strikes at BHP-operated mines in Chile, along with a much weaker dollar. The strike is over, and the dollar is moderating as we head into the weekend, which is taking some tailwinds away from the metal. Traders are watching Federal Reserve Chair Jerome Powell’s speech tomorrow at Jackson Hole before shifting their focus to Chinese economic data due next week.  

Natural gas prices are down for a third day, with losses accelerating today ahead of storage data from the Energy Information Administration (EIA), due later today. There are several reasons bulls couldn’t keep momentum going from earlier this week. The first is European prices fell sharply because the storage situation ahead of winter inspires confidence, sapping the arbitrage premium that helps to attract U.S. LNG exports. The Japan-Korea Marker pricing for LNG also fell compared to Henry Hub prices, further reducing demand on U.S. cargoes. A cooler-than-normal weather forecast for much of the United States also reduced demand domestically. The EIA is expected to report a build of 27 billion cubic feet (Bcf) for the week ending Aug. 22.  

More evidence is accumulating that the unwind of the carry trade is no longer the “tail wagging the dog” in global markets. The Japanese yen (/6JU4) has experienced meaningful two-way price action over the course of the week, largely mirroring movements in U.S.-Japan rate differentials. The bump higher in U.S. Treasury yields is helping the U.S. dollar improve across the board; it would the Dollar Index’s ($DXY) first gain in five days after setting a fresh yearly low just yesterday. 

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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