Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher despite the weaker than expected durable goods report, which showed a 2.2% decline in February when down 0.5% was anticipated.
Jobless claims in the week ended March 19 were 187,000 when 210,000 were estimated.
The 8:45 central time March PMI composite index is predicted to be 56.6.
The 10:00 March Kansas City Fed manufacturing index is expected to be 15.
The dominant influences remain geopolitical tensions and the hawkish Federal Reserve.
CURRENCY FUTURES
The U.S. dollar index is higher and remains close to the highest level in nearly two years after Federal Reserve officials indicated a readiness to take more aggressive steps to bring inflation under control, including a possible 50 basis point fed funds rate hike in May.
The euro zone economic recovery lost pace in March. However, it did come in better than expected. The S&P Global flash composite output index was 54.5 in March when 53.3 was forecast.
The S&P Global/CIPS U.K. manufacturing PMI was at a 13-month low of 55.5 in March of 2022, from 58.0 in February, and was well under market expectations of 56.7.
The CBI distributive trades survey’s retail sales balance in the U.K. fell further to 9 in March of 2022 from 14 in February, which is below market expectations of 10. This was the lowest reading since December.
The Japanese yen fell to a new 6-year low.
Interest rate differential expectations suggest the Japanese yen will trend lower.
INTEREST RATE MARKET FUTURES
Global bond market declines resumed today in anticipation of a looming policy tightening cycle. Several major central banks are attempting to tame inflation, which is currently running at records levels in Europe and 40-year highs in the US.
Market moves were exacerbated this week by surprisingly hawkish comments from Federal Reserve Chair Powell and other Fed officials, which led markets to anticipate a higher probability of the Fed hiking rates by 50 basis points rather than 25 basis points at the May policy meeting.
Cleveland Fed President Loretta Mester said Wednesday that the central bank will need to do “some” 50 basis point rate hikes in 2022.
Federal Reserve speakers today are Neel Kashkari at 8:10, Charles Evans at 8:50 and Raphael Bostic at 10:00.
Some parts of the yield curve have inverted recently, which is a sign that traders worry that a Fed tightening will hurt the economy.
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