Written Commentary
STOCK INDEX FUTURES
The minutes of the Federal Open Market Committee’s July 27-28 policy meeting will be released at 1:00 central time. The notes from the Fed meeting will offer more indications as to when the central bank may begin scaling back its asset-purchase program.
Mortgage applications in the U.S. declined 3.9% in the week ending August 13, which is the biggest fall in four weeks. Applications to refinance a home loan fell 5.3%, while purchases were up 0.8%.
Housings starts in July were 1.534 million when 1.610 million were expected and permits were 1.635 million when 1.620 million were anticipated.
The fundamentals and technical aspects remain positive for U.S. stock index futures.
CURRENCY FUTURES
There is a triple top on the daily chart of the September U.S dollar index at the 93.175 – 93.205 area, which will probably be taken out soon.
Longer term, the greenback is likely to be supported by safe-haven flows of funds.
The U.K. annual inflation rate eased to 2.0% in July from a near three-year high of 2.5% in June and below market expectations of 2.3%.
Japan’s July exports increased 37.0% on the year to a four-month high compared with the market consensus of 39.0% growth and after a 48.6% surge in June.
INTEREST RATE MARKET FUTURES
The Treasury will auction 20-year bonds today.
St. Louis Federal Reserve Bank President James Bullard will speak at 11:00.
The FOMC minutes will likely be the main highlight today.
Recent comments from Federal Reserve officials suggest the central bank could soon taper its asset purchases. Dallas Federal Reserve Bank President Robert Kaplan said the central bank should begin to taper its monthly purchases of Treasury bonds and mortgage-backed securities in October.
The Federal Reserve Bank of Kansas City is proceeding with plans to host a modified, in-person program for this year’s Economic Policy Symposium in Jackson Hole, Wyoming on August 26-28.
The interest rate futures markets have been indicating since May clues about the state of the global economy and inflation with the U.S. Treasury yield curve flattening.
A flattening yield curve suggests a slower rate of global economic growth in the future.
Some traders are questioning why the 30-year Treasury bond futures are substantially off of their May lows if there is the need for an imminent tapering of the Fed’s asset-purchase program.
Futures are holding up well despite all of the tapering talk.
Some analysts believe a tapering will be later rather than sooner, and when it is implemented it will be a dovish tapering with any reduction being small.
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