Written Commentary
STOCK INDEX FUTURES
Futures were higher in the overnight trade due to better than expected corporate earnings. There were quick follow-through gains when the U.S. employment report was released.
The overall weak employment report has bullish ramifications for stock index futures since it may encourage the Federal Reserve to reduce its fed funds rate sooner.
Nonfarm payrolls in April increased to 175,000 when up 243,000 was anticipated.
Average hourly earnings increased 0.2% when a gain of 0.3% was forecast.
The unemployment rate was 3.9% when 3.8% was predicted.
The 8:45 central time April PMI composite report is expected to be 50.9.
The 9:00 April Institute for Supply Management services index is anticipated to be 52.0.
CURRENCY FUTURES
The U.S. dollar index quickly advanced when the disappointing U.S. employment report was released.
European Central Bank Governing Council member and Governor of the Bank of Greece, Yannis Stournaras, said the European Central Bank will probably lower borrowing costs three times this year instead of four.
The unemployment rate in the euro area remained at a record low of 6.5% in March 2024, which was in line with market expectations. The number of unemployed individuals decreased by 94,000 from the prior month to 11.087 million.
The Japanese yen rallied more than 3.0% this week on suspected intervention by Japanese monetary authorities. Japan’s government refused to confirm whether it was behind the currency’s sudden surge. However, Bank of the Japan data suggested approximately $60 billion was spent to prop up the yen.
The Reserve Bank of Australia will meet on May 6 and 7. Economists expect the central bank will leave the cash rate unchanged at 4.35%.
INTEREST RATE MARKET FUTURES
Futures prices quickly advanced when the U.S. employment report was released.
Much of the morning gains due to the bullish employment report will probably be given back later today, especially at the front end of the yield curve.
Federal Reserve speakers today are Austan Goolsbee at 9:30. John Williams and Austan Goolsbee will be participants on a panel at 6:45 PM. The “Getting Global Monetary Policy on Track” event is hosted by the Hoover Institution at Stanford University.
Financial futures markets are predicting there is a 76% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its September 18 meeting.
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