Written Commentary
STOCK INDEX FUTURES
Futures are lower in response to growing evidence that growth in the global economy is slowing.
Jobless claims in the week ended August 14 were 348,000 when 360,000 were expected.
The Philadelphia Federal Reserve manufacturing index was 19.4 when 25.0 was predicted.
The 9:00 July leading indicators report is anticipated to show an increase of 0.8%.
In recent months stock index futures have shown a tendency to recover from bearish news.
CURRENCY FUTURES
Yesterday, before the release of the minutes of the July 27-28 FOMC policy meeting, the September U.S. dollar index advanced above a triple top on the daily chart at the 93.175 – 93.205 area.
The greenback weakened a bit following the release of the FOMC minutes, in which officials said they are evaluating bond-taper prospects over coming meetings and that it’s possible to reach the Fed taper threshold this year.
Prior to the release of the minutes there were multiple Fed officials that indicated a tapering could take place earlier than the minutes suggested.
The greenback is higher today, advancing to its highest level since December 2020, due to a safe haven flow of funds.
Longer term, the greenback is likely to be supported by a flight to a quality flow of funds.
The Australian dollar fell to its lowest level since December 2020 due to concerns over a slowdown in the country’s economic growth.
INTEREST RATE MARKET FUTURES
The 30-year Treasury bond futures firmed after yesterday’s release of the FOMC minutes.
There are follow-through gains today due to growing concerns about the state of the global economic recovery.
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 the tapering talk, which suggests additional gains are likely for the 30-year Treasury bond futures.
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