Eurostoxx futures rose by 0.4% during early European trading, fueled by strong earnings reports from Microsoft and Meta. Other European indices are seeing similar gains: German DAX futures are up 0.3%, French CAC 40 futures have increased by 0.6%, and UK FTSE futures have risen by 0.1%. In the U.S., futures are climbing as well. S&P 500 futures increased by 0.9%, and Nasdaq futures are up 1.3%. The market is anticipating more earnings reports, as Apple and Amazon will share their Q2 results later today.

Optimism Driven by Big Tech

The current optimism from big tech suggests a short-term market upswing. Traders may consider buying near-term call options on the Nasdaq 100 to take advantage of the momentum from companies like Microsoft and Meta. The upcoming earnings from Apple and Amazon will be crucial in determining if this trend continues. However, we should be careful since market volatility is low, with the VIX index around 13. While this makes options cheaper, it could also indicate complacency and a risk of sudden market shifts. It might be wise to use protective strategies, like buying put spreads on the S&P 500, to guard against any negative surprises or changes in sentiment. In Europe, the gains in the Eurostoxx 50 seem less stable, especially as the ECB remains cautious about inflation. We recall how the rally in early 2025 stalled when economic data fell short of expectations. A potential strategy could be selling covered calls on broad European ETFs, allowing for premium earnings while the market processes conflicting signals.

Focus on Central Bank Policy

In the weeks ahead, attention will likely return to central bank policy rather than earnings. The US Core PCE inflation for June 2025 was reported at 2.8%, still above the Federal Reserve’s target. This means interest rate decisions continue to pose a risk. Unexpected strength in the upcoming jobs report could dampen current market enthusiasm. This situation reminds us of the narrow, tech-led rally throughout much of 2023. To navigate this, we could consider a pairs trade, going long on technology sector futures while buying puts on a more cyclical index like the Russell 2000. This strategy focuses on the belief that tech will outperform the broader, more economically sensitive market. Create your live VT Markets account and start trading now.

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