Risk-Off Day in Financial Futures Markets
STOCK INDEX FUTURES
Global stock markets sold off sharply due to reduced confidence in the global economic recovery. In addition, in the U.S., it is more likely that an economic relief package will not come until after the November 3 election.
Mortgage applications in the U.S. increased 1.7% in the week ended October 23, according to the Mortgage Bankers Association. Home mortgage applications increased 0.2% and applications to refinance a home advanced 2.5%.
Third quarter corporate earnings reports have been mostly stronger than estimated.
Approximately a third of the companies in the S&P 500 are reporting quarterly results this week.
Increased volatility, in light of the uncertainties of the U.S. November election, is a good reason to reduce trading size or stand aside.
The U.S. dollar is higher in a flight to quality move due to concerns about the global economic recovery, rising stock market volatility ahead of the U.S. presidential election and likely no further fiscal stimulus from Washington before November 3.
The British pound is lower due to a lack of progress on a Brexit deal. Investors hope that some kind of free trade agreement between the U.K. and the E.U. can be made after talks have been extended until today.
The Swiss franc is lower after a report showed Swiss investor sentiment dropped 23.9 points from the prior month to 2.3 in October 2020, which is the lowest since March.
The Australian dollar is lower despite news that Australian inflation increased 0.7% year-on-year in the third quarter after a 0.3% decline in the second quarter.
INTEREST RATE MARKET FUTURES
Safe-haven buying is coming into the interest rate futures markets in light of concerns over the state of the global economy and the uncertainties surrounding the U.S. November elections.
The Treasury will auction five-year notes today.
Financial futures markets are predicting there is a 98.8% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at the November 4-5 policy meeting.
Political markets are the most difficult to trade, which is a reason to reduce trading size.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.