Written Commentary
STOCK INDEX FUTURES
Stock index futures are mostly lower, and similar yesterday, futures have not positively responded to economic reports that would encourage the Federal Reserve to more aggressively pivot to accommodation.
Non-farm payrolls in August increased 142,000 when a gain of 160,000 was expected, and manufacturing payrolls fell 24,000 when down 2,000 was anticipated.
Private payrolls were up 118,000, which compares to the estimate of a 136,000 gain.
The unemployment rate was 4.2% as anticipated.
Seasonally, September has been a weak month for stock index futures.
CURRENCY FUTURES
The U.S. dollar index was lower in the overnight trade with additional pressure taking place when the 7:30 U.S. employment numbers were released.
German industrial production contracted 2.4% month-over-month in July, compared with market estimates of a 0.3% decline.
The gross domestic product in the euro area increased 0.2% on the quarter in the second quarter, which is slightly lower than the initial estimate of 0.3% growth, and compared to a 0.3% advance in the previous quarter.
The Halifax House Price Index in the U.K. increased 4.3% year-on-year in August, which is the largest increase since November 2022, and compares to forecasts of 4.2%.
INTEREST RATE MARKET FUTURES
Futures quickly advanced across the board when the weaker than predicted U.S. August employment numbers were released.
Federal Reserve Bank of Chicago President Austan Goolsbee yesterday said the recent trend in economic data justifies multiple rate reductions, and he sees increasing warning signals about the labor market outlook.
Federal Reserve speakers today are John Williams at 7:45 in Christopher Waller at 10:00 AM.
The Federal Reserve’s self-imposed speaker blackout period, which takes place in advance of the upcoming Federal Open Market Committee meetings, starts tomorrow.
Prospects of a 50 basis point reduction in the fed funds rate at the upcoming Federal Open Market Committee meeting have substantially increased from where they were earlier in the week.
Currently there is a 51% probability that the Federal Open Market Committee will lower its funds rate by 50 basis points at its September 18 meeting, and there is a 49% probability that the FOMC will reduce its key interest rate by 25 basis points in September.
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