Written Commentary
STOCK INDEX FUTURES
Stock index futures are mixed to lower.
Mortgage applications in the U.S. fell 1.0% in the week ending October 20, extending the decline of 6.9% from the previous week, according to data from the Mortgage Bankers Association. This decline took the index that measures the volume of mortgage demand to the lowest level since 1991.
The 9:00 central time September new home sales report is expected to be 685,000.
At 3:35 Federal Reserve Chair Powell will deliver opening remarks at the Moynihan Lecture in Social Science and Public Policy in Washington, DC.
Powell’s speech today is an exception to the Federal Reserve’s speakers blackout policy that is in effect in advance of Federal Open Market Committee Meetings.
The situation in the Mideast remains the dominant fundamental.
CURRENCY FUTURES
The U.S. dollar is higher.
In recent weeks there has been only a limited flight-to-quality flow of funds into the greenback, which is a sign of longer-term weakness.
Bank lending to households in the euro zone increased by 0.8% year-on-year in September 2023, which is the least since June 2015 and is below market expectations of 1.0%
The Ifo Business Climate indicator for Germany increased 1.1 points from the previous month to 86.9 in October 2023, which is the first increase in six months and exceeded the market estimate of 85.9.
The Bank of Canada is widely expected to leave its key overnight interest rate on hold when it announces its policy decision today.
INTEREST RATE MARKET FUTURES
Futures are lower with virtually no flight to quality buying recently in light of the conflict in the Middle East, which is surprising and a sign weakness.
Some analysts believe the underperforming futures market can be explained by concerns about increasing government offerings of Treasury issues to cover widening deficits.
The Treasury will auction five-year notes today.
Financial futures markets are now predicting there is a 97% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at its November 1 policy meeting. There is a 3% probability of a 25 basis point reduction, which is likely a reflection of increasing geopolitical risks.
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