Written Commentary
STOCK INDEX FUTURES
Stock index futures were higher in the overnight trade with follow-through gains when the U.S. consumer price index report was released.
S&P 500 and NASDAQ futures hit new highs for the year.
The May consumer price index increased 0.1% when up 0.2% was expected and on a year-to year basis the consumer price index increased 4.0% when a gain of 4.1% was anticipated.
The National Federation of Independent Business Small Business Optimism Index in the U.S. increased slightly to 89.4 in May compared to the previous month’s reading of 89.0, surpassing market expectations of 88.5. The index remained below its 49-year average of 98 for the last 17 months.
Futures continue to overperform the news.
CURRENCY FUTURES
The U.S. dollar index was lower in the overnight trade and came under additional pressure when the U.S. consumer price index report was released.
The ZEW Indicator of Economic Sentiment for Germany improved to -8.5 in June from the previous month’s reading of -10.7 and above market predictions of -13.1.
The European Central Bank will decide monetary policy on Thursday, and recent comments from officials suggest borrowing costs will continue to increase. The ECB is expected to hike rates by 25 basis points, after surprise hawkish moves from the Bank of Canada and the Reserve Bank of Australia last week.
The unemployment rate in the U.K. was 3.8% in February to April 2023, which is up 0.1% on the quarter but under market expectations of 4.0%. The number of unemployed increased by 52,000 to 1.31 million.
The Bank of Japan is expected to maintain its ultra-loose monetary policy at its policy meeting on June 16 and maintain its forecast for a moderate economic recovery.
Australia’s NAB business confidence index unexpectedly was -4 in May, which compared with market estimates of 0.
INTEREST RATE MARKET FUTURES
Futures were higher in the overnight trade and continued to advance when the U.S. consumer price index report was released.
The Treasury will auction 30-year bonds today.
There are no major Federal Reserve speakers today.
Financial futures markets are predicting there is a 95% probability that the Federal Open Market Committee will keep its fed funds rate unchanged policy meeting tomorrow, and there is a 5% chance of a 25 basis point increase.
Traders now await the U.S. producer price index report tomorrow for further clarity on inflationary pressures.
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