Written Commentary
STOCK INDEX FUTURES
Stock index futures are mixed, although NASDAQ futures were able to advance to new record highs in the overnight trade.
The 9:00 central time October wholesale inventories report is expected to show a 0.1% increase.
There are indications that the U.S. economy will perform better than the consensus view in 2025.
The long term fundamentals and technicals remain supportive to stock index futures.
CURRENCIES
The U.S. dollar index is slightly lower this morning. On Friday the greenback was able to close above a double bottom breakout to the downside, which suggests an oversold situation.
Ongoing political unrest in South Korea and France, along with the fall of Syrian President Assad’s regime, is providing underlying support for the greenback.
Euro zone investor morale fell in December to its lowest level in over one year. The Sentix index for the euro zone declined to -17.5 in December from -12.8 in November, which is the lowest level since November 2023 and is a bigger decline than the -13.5 predicted by economists.
The European Central Bank is widely expected to cut its key deposit rate by 25 basis points for the fourth time, bringing it down to 3.0% on Thursday. Analysts now expect a faster pace of policy easing from the ECB, with predictions of a quarter-point rate reduction at every meeting through June.
U.K. business confidence fell to the lowest level in almost two years after the Labour budget was revealed.
The fundamentals and technicals remain supportive to the U.S. dollar, and higher prices are likely.
The fundamentals and technicals remain bearish for the euro currency and the British pound, and lower prices are likely.
The Reserve Bank of Australia will hold its policy meeting on Tuesday. Analysts believe the central bank will leave its cash rate unchanged at 4.35%.
INTEREST RATES
Futures are lower across the board.
There are no Federal Reserve speakers scheduled between now and the December 18 Federal Open Market Committee meeting, which is in keeping with the central bank’s self-imposed blackout period in advance of policy meetings.
There is an 87% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its December 18 policy meeting, and there is a 13% chance of the FOMC keeping rates unchanged at 4.50% – 4.75%.
It is likely that the FOMC will be slower to add accommodation in 2025 than the consensus view.
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