Written Commentary
STOCK INDEX FUTURES
U.S. stock index futures came under pressure, tracking lower European equity markets a day after the NASDAQ closed at a record high. Selling today is linked to weak euro zone PMIs.
In addition, hopes for a fiscal stimulus package dimmed due to the ongoing gridlock in Washington.
The 8:45 central time August PMI composite index is expected to be 51.3 and the 9:00 July existing home sales report is anticipated to show 5.4 million.
Traders believe the Federal Reserve will do more to support the economy if required.
Overall, U.S. stock index futures are performing well for the news.
CURRENCY FUTURES
The U.S. dollar is higher, and the euro currency is lower after IHS Markit data indicated a smaller rebound in activity in the euro zone’s manufacturing and services sectors than economists had predicted. The euro zone August composite PMI flash estimate was 51.6 when 54.7 was forecast.
The British pound fell against the dollar after signs that trade talks with the European Union have stalled.
In addition, there was selling in the pound when the Confederation of British Industry said its Industrial Trends Survey – Orders came in weaker than expected in August at -44% when -35% was expected.
Pressure on the pound was limited by a report that showed U.K. retail sales were 3.6% higher in July than in June. Economists had anticipated sales to increase 1.4%.
Japan’s July core CPI was unchanged on the year, which compares to the estimated 0.1% increase.
The Australian dollar is lower despite news that preliminary retail sales were up 3.3% in Australia in July.
INTEREST RATE MARKET FUTURES
Futures are higher in light of the weak euro zone PMI numbers and lower stock index futures.
The yield on the benchmark 10-year U.S. Treasury note ticked lower to 0.641% from 0.644% Thursday.
Interest rate market futures, especially at the short end of the curve are likely to be supported by ideas that major central banks, including the Federal Reserve, will keep short term interest rates low for an extended period.
The next Federal Open Market Committee meeting is scheduled for September 16. Financial futures markets are predicting there is a 90% probability that the FOMC will maintain its fed funds target rate at zero to 25 basis points.
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