Written Commentary
STOCK INDEX FUTURES
U.S. stock index futures declined yesterday after a report showed the annual rate of inflation in the U.S. hit a 31-year high at 6.2%.
Inflationary pressures in the global economy are broadening and remain a concern.
There are fears that inflation will stay high for longer-than-expected, which could force central banks to tighten credit policies sooner.
Countering the bearish inflation influence is the better than expected corporate earnings reports.
CURRENCY FUTURES
The U.S. dollar index advanced to its highest level since July of 2020. The larger than estimated increase in the U.S. consumer price index puts pressure on the Federal Reserve to tighten credit conditions, which in turn, is bullish for the U.S. dollar.
The Australian dollar is lower on news that the unemployment rate increased to 5.2% in October from 4.6% in September, which is more than the 4.7% expected by economists.
The Reserve Bank of Australia last week said it sees the unemployment rate at 5.0% in December before easing to 4.25% at the end of 2022, and to 4.0% a year later.
INTEREST RATE MARKET FUTURES
Increased expectations of an earlier tightening by the Federal Reserve pressured futures yesterday.
There is a strengthening case that central banks are behind the curve, meaning the U.S. Federal Reserve and other central banks will likely bring forward interest rate hikes.
There are no Federal Reserve speakers scheduled for today.
The 30-year Treasury bond futures are holding up well despite yesterday’s bearish U.S. consumer price index report.
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