Written Commentary
STOCK INDEX FUTURES
Stock index futures were sharply lower in the overnight trade due to ongoing tensions in Eastern Europe, but were able to partially recover.
The 2:00 central time January consumer credit report is expected to show a $21.5 billion increase.
The dominant influences remain geopolitical tensions followed distantly by the hawkish Federal Reserve.
CURRENCY FUTURES
Flight to quality longs are being established in the U.S. dollar, as investors continue a flight to safety.
The U.S. dollar is now at its highest level since May 2020. Additional safe-haven buying is likely to come into the U.S. dollar.
The euro weakened to its lowest level since May 2020 despite news that new orders for German manufactured goods increased 1.8% month-to-month in January of 2022, following an upwardly revised 3.0% gain in December and much better than market forecasts of a 1.0% advance.
Swiss consumer price inflation increased by a higher than expected 2.2% in February, which is the highest level since 2008.
U.K. average property prices increased 10.8% year-over-year in February to a new all-time high.
INTEREST RATE MARKET FUTURES
With stock index futures partially recovering from their overnight lows, some flight to quality longs were liquidated.
Financial futures markets are predicting there is a 97.8% probability that the Federal Open Market Committee will hike its fed funds rate by 25 basis points and a 2.2% probability that the rate will remain unchanged at 0 to 25 basis points at its March 16 policy meeting. The probability for a 50 basis point hike is virtually zero. A few weeks ago the probability of a 50 basis point rate increase was over 50%.
Fed Chairman Jerome Powell last week said he would support a 25 basis point interest rate increase at the central bank’s upcoming meeting next week but added that he would be “prepared to move more aggressively” later if inflation does not subside as quickly as anticipated.
Some analysts believe that if the rate of growth in the U.S. economy slows, and also globally, it may be difficult for the Federal Reserve and other major central banks to maintain ramped-up hawkish policies.
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