Written Commentary
INTEREST RATE MARKET FUTURES
Futures are mostly higher.
Futures firmed when the 7:30 central time U.S. employment report was released.
Federal Reserve speakers today John Williams at 9:15, Michelle Bowman at 9:15, Adriana Kugler at 11:20, Federal Reserve Chair Powell at 11:30 and Adriana Kugler at 12:00.
There has been a major change in the fundamentals and outlook for Federal Reserve policies. The probabilities are increasing that the central bank will more aggressively ease credit conditions this year.
Financial futures markets are predicting the Federal Open Market Committee will keep its fed funds rate unchanged at its March and May meetings but will lower its key rate three more times this year with the first reduction at its June policy meeting.
In light of increasing probabilities of the FOMC more aggressively moving to accommodation this year, additional price gains for futures across the yield curve are likely.
STOCK INDEX FUTURES
Stock index futures are lower in light of the on-balance weaker than expected U.S. employment data.
Nonfarm payrolls in February increased 151,000, which compares to the anticipated gain of 160,000.
Private payrolls were up 140,000 when 143,000 was forecast, and manufacturing payrolls were up 10,000 when an increase of 5,000 was estimated.
The unemployment rate was 4.1%, which compares to the consensus estimate of 4.0%, and average hourly earnings increased 0.3% as forecast.
The 2:00 central time January consumer credit report is expected to show a $5.5 billion increase.
While current geopolitical and economic concerns are exerting downward pressure on stock index futures, in the longer term futures will be supported by a more accommodative Federal Open Market Committee.
CURRENCY FUTURES
The U.S. dollar index declined for a fifth consecutive session, reaching its lowest level since November 5 in light of increasing concerns over the escalating trade war.
There was additional pressure on the greenback when the on-balance weaker than expected employment data were released.
Industrial orders in Germany declined 7% in January compared to the previous month, according to data released by the federal statistics office. Analysts had anticipated a smaller decline of 2.8%.
Some analysts believe the European Central Bank may lower its key interest rate only one more time this year, which could be in June. This compares to earlier estimates of two interest rate reductions this year, one in April and another in June.
The Japanese yen advanced and remains near a five-month high, as demand for safe-haven assets increased in light of growing concerns over tariff risks.
The Bank of Japan is likely to increase interest rates further this year, possibly at its July policy meeting.
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