Written Commentary
STOCK INDEX FUTURES
Stock index futures were higher in the overnight trade with follow-through gains when the smaller than expected increase in the U.S. consumer price index was reported. The June consumer price index report showed a 0.2% increase when up 0.3% was expected.
The June producer price index is scheduled to be released tomorrow.
September S&P 500 futures advanced above a double top pattern.
The Federal Reserve will release its Beige Book on the economy at 1:00 central time. This book is produced approximately two weeks before the monetary policy meetings of the Federal Open Market Committee. On each occasion, a different Federal Reserve district bank compiles anecdotal evidence on economic conditions from each of the 12 Federal Reserve districts.
Many analysts are leaning to the bearish side, which from a contrarian point of view suggests higher prices, at least in the short term.
CURRENCY FUTURES
The U.S. dollar index is lower in response to today’s consumer price index report and despite yesterday’s hawkish comments from Federal Reserve Bank of Cleveland President Loretta Mester.
Japan’s wholesale inflation slowed for a sixth consecutive month. The corporate goods price index, which measures the price companies charge each other for their goods and services, increased 4.1% in June from a year earlier, which is slower than a median market forecast for a 4.3% advance. The increase followed a 5.2% gain in May, and was the slowest annual pace since April 2021.
A signal from the Polish central bank is indicating it may start cutting interest rates as early as September. The two interbank interest rates that are considered to be benchmarks for interest payments on most mortgage, corporate and consumer loans dropped. The six-month Wibor rate is down 10 basis points and its three-month equivalent declined three basis points.
The Reserve Bank of New Zealand maintained its official cash rate at 5.50% at its July meeting, as expected.
Brazil’s annual inflation in June fell to its lowest level since September 2020. Annual inflation slowed to 3.16% in June from 3.94% in May.
INTEREST RATE MARKET FUTURES
Yesterday President of the Federal Reserve Bank of San Francisco Mary Daly said she expects two additional rate hikes to be announced this year to lower inflation, which is in line with recent comments from Fed Chairman Jerome Powell.
Futures are higher in response to today’s bullish consumer price index report.
Federal Reserve speakers today are Neel Kashkari at 8:45 and Loretta Mester at 3:00 this afternoon.
The Treasury will auction 10-year notes.
Financial futures markets are predicting there is a 91% 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 9% chance that the fed funds rate will remain unchanged.
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