Written Commentary
INTEREST RATE MARKET FUTURES
Yesterday the 30-year U.S. Treasury bond futures advanced to their highest level since July of 2023.
There was little reaction to this morning’s release of the August producer price index report.
The U.S. Treasury will auction 30-year bonds today.
Currently there is an 87% probability that the Federal Open Market Committee will lower its funds rate by 25 basis points at its September 18 meeting, and there is a 13% probability that the FOMC will reduce its key interest rate by 50 basis points in September.
STOCK INDEX FUTURES
Stock index futures are higher.
The August producer price index increased 0.2% as expected, and the producer price index on a year-to-year basis was up 1.7% when an increase of 1.8% was anticipated.
The August producer price index excluding food and energy was up 0.3% when up 0.2% was forecast, and on an annualized basis the producer price index excluding food and energy increased 2.4% when a gain of 2.5% was estimated.
Jobless claims in the week ended September 7 were 230,000 as expected.
Stock index futures have recently performed better than the news would suggest, which should be viewed as a sign of strength.
CURRENCY FUTURES
There was little reaction to this morning’s release of the August producer price index report.
The European Central Bank lowered its key interest rate by 25 basis points to 3.5%, which was widely expected.
Wholesale prices in Germany decreased by 1.1% year-on-year in August from a 0.1% drop in the previous month. This was the 16th consecutive month of declining producer prices and the largest drop since April.
Consumer inflation expectations in Australia were at 4.4% in September, which is slightly down from August’s 4-month high of 4.5%.
Japan’s annual wholesale inflation slowed in August, which reduces pressure on the Bank of Japan to increase interest rates. The Bank of Japan reported the corporate goods price index, which measures the price companies charge each other for their goods and services, increased 2.5% in August from a year ago, slowing from the 3.0% increase in July. Economists predicted a 2.8% increase.
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