Written Commentary
STOCK INDEX FUTURES
U.S. stock index futures turned risk-averse with a variety of negative headlines from around the world hitting stock index futures.
The chances of a new economic stimulus deal in the U.S. are fading, U.S.-China tensions are escalating and there are increased political uncertainties in Washington.
CURRENCY FUTURES
Flight to quality currencies, the U.S. dollar and the Japanese yen advanced in light of the risk-off mood today.
The yen hit a six-month high against the U.S. dollar, gaining for a sixth consecutive session, as stock markets globally declined and pushed investors to the perceived safety of the Japanese currency.
The yen is approaching levels that in the past have prompted calls from Japan’s monetary authorities to limit gains in the yen. The upcoming U.S. elections, as well as the ongoing tensions between the U.S. and China have contributed to the safe haven demand for the yen.
INTEREST RATE MARKET FUTURES
Flight to quality buying is coming into the interest rate market futures in light of the risk-off mood to financial markets.
Earlier today Federal Reserve Bank President Robert Kaplan said he expects zero rates will be appropriate for the next two-and-a-half to three years, and by 2023 the U.S. could start to approach 3.5% unemployment.
Federal Reserve speakers today are John Williams at 5:00 p.m. and Robert Kaplan also at 5:00.
Interest rate market futures at the short end of the curve are likely to be supported by ideas that major central banks, including the Federal Reserve, will keep short term interest rates low for an extended period. Many analysts believe it will be several years before the Federal Reserve will be in a position to hike its fed funds rate.
The next Federal Open Market Committee meeting is scheduled for November 4-5.
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