Written Commentary
STOCK INDEX FUTURES
Stock index futures closed out last week on a strong note despite hawkish comments from U.S. policymakers earlier in the week, including Fed Chair Jerome Powell saying the central bank is “not confident” that it has done enough to bring down inflation. Powell said the central bank will not hesitate to tighten more if needed to bring inflation down to 2.0%.
There are no major economic reports scheduled for today.
However, the October consumer price index report will be released on Tuesday, which is expected to show a 0.1% increase, and on Wednesday the October producer price index will be reported and is anticipated to show a 0.1% advance.
CURRENCY FUTURES
The U.S. dollar firmed today but has underperformed the news in since early October.
Germany’s current account surplus widened in September 2023 from the same month last year.
The Japanese yen depreciated toward 152 per dollar as investors braced for U.S. inflation data and further commentary from Federal Reserve officials this week. So far today there have been no threats of intervention from Japan’s monetary authorities.
INTEREST RATE MARKET FUTURES
The yield on 10 and 30-year U.S. Treasuries increased slightly today as investors reacted to news that on Friday Moody’s lowered its U.S. credit rating outlook from stable to negative, citing increasing fiscal deficits and political standoffs in Washington.
Moody’s said that “without effective fiscal policy measures to reduce government spending or increase revenues” in a high interest rate environment, it expects “that the U.S. fiscal deficits will remain very large and significantly weakening debt affordability.
Financial futures markets are predicting there is an 86% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at its December 13 policy meeting, and there is a 14% probability of a 25 basis point increase.
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