Written Commentary
STOCK INDEX FUTURES
Stock index futures are trading higher in light of mostly better than expected U.S. bank earnings reports.
Futures continue to trade in an atmosphere of uncertainty about the pace of Federal Reserve interest rate cuts and escalating geopolitical risks in the Middle East.
Import prices in September on a month-to-month basis fell 0.4%, which compares to the expected 0.3% decline, and export prices fell 0.7% when down 0.4% was anticipated.
The technical aspects for stock index futures remain supportive.
CURRENCY FUTURES
The U.S. dollar index advanced to its highest level since August 2.
Interest rate differentials remain supportive to the greenback.
A recent survey showed economists expect inflation will remain above the European Central Bank’s 2.0% target in the medium term. In the euro zone, economists anticipate the inflation rate will reach 2.6% this year.
The European Central Bank is expected to cut its deposit rate by 25 basis points on Thursday, following reductions in September and June.
The annual inflation rate in the U.K. declined to 1.7% in September 2024, which was the lowest since April 2021 and compares to forecasts of 1.9%.
Japan’s core machinery orders declined 1.9% in August from the previous month, which was lower for two straight months. This compared with a 0.1% decline anticipated by economists.
INTEREST RATE MARKET FUTURES
Futures were higher in the overnight trade as it appears more likely that the Federal Open Market Committee will lower its key interest rate again in November.
Atlanta Federal Reserve Bank President Raphael Bostic said late on Tuesday that there may be just one more 25 basis point rate reduction this year despite median forecasts for two 25 basis point reductions.
Currently there is a 96% probability that the FOMC will lower its fed funds rate by 25 basis points at its November 7 policy meeting, and there is a 4% chance that the FOMC will keep its key interest rate unchanged at 4.75% – 5.00%.
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