Nasdaq 100 Surges After Micron Earnings and China’s Additional Stimulus

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

1. Nasdaq 100 E-mini futures (/NQ): +1.67% 

2. 30-year T-bond futures (/ZB): +0.03% 

3. Silver futures (/SI): +0.74% 

4. Crude oil futures (/CL): -3.49% 

5. Japanese yen futures (/6J): +0.01% 

The stimulus spigot is opening even farther. China has continued to unveil efforts to boost its flagging economy, with the latest announcement catching everyone’s attention: China “will ensure necessary fiscal stimulus.” That’s a change from the bevy of supply-side reforms announced in recent months and this week, which suggests legitimate efforts to try to boost aggregate demand are afoot. Considering the timing of these stimulus announcements—just as commodities (see: DBC or DJP) are coming off their yearly lows—the measures by China may prove to be a significant global macroeconomic stabilizer. 

Micron Technology (MU) surprised investors this morning by providing rosy guidance for its revenue and sales. The stock was nearly 20% higher in pre-market trading. If those gains hold, it would be the biggest daily percentage increase for the stock in over a decade. Economic data, such as weekly jobless claims, helped to assuage any fears of an economic slowdown as we approach the last quarter of the year. S&P 500 contracts (/ESZ4) rose nearly 1% ahead of the opening bell. 

Yields rose along the short end of the curve as longer-term yields fell this morning. Bond traders will see a seve-year note auction from the Treasury today. Yesterday’s five-year note auction saw decently strong demand. Buyers showed up for 30-year T-bond futures (/ZBZ4) after this morning’s jobless claims data highlighted a still-resilient labor market. Federal Reserve Chair Jerome Powell and several other Fed speakers are on the schedule for today, which could influence the bond market further. 

Silver prices (/SIZ4) caught an additional tailwind overnight after Chinese policymakers vowed to support the economy with fiscal measures following a rate cut from the People’s Bank of China (PBOC) earlier this week. The coordinated monetary and fiscal effort shows China is getting serious about supporting economic growth going into the end of the year. Silver prices will likely benefit from the increased industrial spending, which is also being reflected in copper prices (/HGZ4).  

Crude oil prices fell after Reuters reported Saudi Arabia is planning to scrap its oil price target as it prepares to raise output later this year. The abandonment of the price target shows the OPEC producer is ready to pump more despite price remaining well under $100 per barrel. The Energy Information Administration (EIA) reported refinery inputs dropped last week, hinting that demand is likely falling in the United States. The news from China, while positive for oil prices, failed to fend off the bearish news flows.  

The risk-on, growth-positive movement in asset prices overnight has barely touched FX markets. The U.S. dollar ($DXY) is holding its ground, with the China-sensitive Australian dollar (/6AZ4) benefiting the most. And while the Japanese yen (/6JZ4) is barely changed, there is a compelling case that traders may start to use the yen as a funding currency in carry trades if global central banks are opening the liquidity spigots more aggressively. 

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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