Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher.
Personal income in May increased 0.4% as expected, and the PCE price index advanced 0.1% as anticipated. However, the core PCE price index was up 0.3% when a gain of 0.4% was predicted, and that was the portion of the report that sparked a rally in stock index futures.
The 8:45 central time June PMI is estimated to be 44.2.
The 9:00 June consumer sentiment index is expected to be 63.9.
Stock index futures continue to perform better than the news would suggest.
CURRENCY FUTURES
The U.S. dollar index is lower in response to the smaller than anticipated increase in the core PCE price index.
The consumer price inflation rate in the euro area decreased to 5.5% in June 2023, which is down from 6.1% in the previous month and slightly below market expectations of 5.6%.
However, the euro area core inflation rate re-accelerated in June, which applies pressure on the European Central Bank to hike interest rates again in July.
The seasonally-adjusted unemployment rate in the euro area remained at a record low of 6.5% in May 2023, which is unchanged from the previous month and matching market estimates.
The U.K. economy grew by only 0.1% in the first three months of the year, which is unchanged from an initial estimate.
Japan’s jobless rate was unchanged at 2.6% in May from the previous month and matched economists’ median forecast of 2.6%.
INTEREST RATE MARKET FUTURES
Futures advanced when the smaller than expected increase in the core PCE price index was reported.
Several portions of the U.S. Treasury yield curve have become even more inverted recently, which is a sign that investors are increasingly worried about an economic slowdown.
Financial futures markets are predicting there is an 84% probability that the Federal Open Market Committee will hike its fed funds rate by 25 basis points at the July 26 meeting, and there is a 16% chance that the fed funds rate will remain unchanged.
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