Written Commentary
STOCK INDEX FUTURES
The Organization for Economic Co-operation and Development this week lowered its forecast for global growth this year by 1.5 percentage point to 3.0%, and warned that sharp interest rate increases by central banks could reduce growth further.
Traders are watching economic data closely for clues about the Federal Reserve’s path for raising interest rates.
A key test for markets will be Friday’s release of the May consumer price index. The closely watched inflation gauge is expected to increase 8.2% in May from a year earlier, according to economists. This estimate is lower than the April actual figure of up 8.3%. Excluding food and energy, price growth is anticipated to cool slightly to an annual rate of 5.9% in May from 6.2% the previous month.
Jobless claims in the week ended June 4 were 229,000 when 210,000 were expected.
Stock index futures remain in a 9-day congestion pattern.
CURRENCY FUTURES
The euro currency is higher. The European Central Bank held its policy meeting today and committed to a quarter-point increase in interest rates next month and opened the door to a larger hike in the fall as it confronts record inflation.
The ECB said in a statement that it would increase its key interest rate from minus 0.5% to zero or higher by September, and probably further after that. In addition, it said it would end its large-scale bond-buying program on July 1.
The ECB said it intends to hike its key rate by 25 basis points at its next policy meeting in July, and to increase it again in September, possibly by more than 25 basis points.
Demand for U.K. homes fell for the first time since August last month in an early indication that rising interest rates are taking a toll on the property market.
INTEREST RATE MARKET FUTURES
The Treasury will auction 30-year bonds today.
Federal Reserve officials have indicated they plan to raise interest rates by half a percentage point at next week’s policy meeting, and by the same amount again in July.
Financial futures markets are predicting there is a 97.5% probability that the Federal Open Market Committee will hike its fed funds rate by 50 basis points and a 2.5% probability that the rate will increase by 75 basis points at the June 15 policy meeting.
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