Written Commentary
STOCK INDEX FUTURES
U.S. stock index futures are lower as negotiations in Washington continue over a fiscal stimulus package. Congress and the White House have not agreed on a much-anticipated fiscal stimulus deal, although talks are continuing.
In addition, there is increased trade friction between the U.S. and China.
The September Chicago Federal Reserve national activity index was 0.27 when 0.39 was expected.
The 9:00 central time September new home sales report is anticipated to show 1,016,000.
The October Dallas Federal Reserve manufacturing index will be released at 9:30. In September the index was 13.6.
Third quarter corporate earnings have been mostly stronger than estimated.
Approximately a third of the companies in the S&P 500 will report quarterly results this week.
CURRENCY FUTURES
After lower prices last week, the U.S. dollar is higher today due to a general risk aversion sentiment. However, lower prices are likely for the greenback longer term.
The euro currency is lower after a report showed German business morale for October came in weaker than expected. German business sentiment fell in October after increasing for five consecutive months, according to the Ifo Institute. The Ifo business-climate index came in at 92.7 in October, compared with a downwardly revised 93.2 in September. Economists had forecast it at 92.9.
Pressure on the euro was limited by reports that the German government will revise upwards its forecast for gross domestic product for 2020 when it presents an update to its estimates later this week.
Higher prices are likely for the euro longer term.
The British pound is little-changed from the previous session following news that Brexit talks had been extended until October 28.
The Japanese yen is lower despite a report that the index of coincident economic indicators in Japan posted the highest reading since March, while the index of leading economic indicators posted the highest level since February.
The Australian dollar is lower after preliminary figures showed exports of goods in September increased 3.0% from the previous month, while imports declined 1.0% over the same period.
INTEREST RATE MARKET FUTURES
Futures are mostly higher in a flight to quality move.
Interest rate market futures at the short end of the curve are likely to be supported by ideas that major central banks, including the Federal Reserve, will keep short term interest rates low for an extended period. Many analysts believe it will be several years before the Federal Reserve will be in a position to hike its fed funds rate.
However, futures at the long end of the curve, especially the 30-year Treasury bond futures may be undermined by the inflationary aspects of the Federal Reserve’s “average inflation targeting” policy.
Rallies in the 30-year Treasury bond futures should be viewed a selling opportunities.
Financial futures markets are predicting there is a 97.7% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at the November 4-5 policy meeting.
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