Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher.
The 8:45 central time August PMI final is expected to be 45.0.
The 9:00 August Institute for Supply Management services index is anticipated to be 55.4.
There may be some additional bounce today since so much of the commentary and sentiment is overwhelmingly bearish.
CURRENCY FUTURES
The U.S. dollar index advanced to a 20-year high yesterday.
The long term trend for the U.S. dollar is higher as Federal Reserve officials have become even more hawkish in their rhetoric recently.
The euro currency is lower on news that German factory orders fell for the sixth consecutive month in July. New orders in Germany’s manufacturing sector decreased 1.1% on the month. The reading missed the consensus forecast of a 0.5% decline.
The S&P Global euro zone construction PMI fell to 44.2 in August of 2022 from 45.7 in July, pointing to a fourth consecutive month of falling construction and the steepest since January of last year.
The European Central Bank may raise its key interest rate by 75 basis points at its policy meeting on September 8 in response to last week’s record high inflation reading.
The Japanese yen fell to a new 24-year low today as the Federal Reserve is expected to continue to hike interest rates aggressively, while the Bank of Japan has now held short-term rates in negative territory for more than six years.
Japan’s households cut back on spending in July, while real wages fell again. Household outlays dropped 1.4% from June
The Reserve Bank of Australia raised the cash rate by 50 basis points to 2.35% at its policy meeting today, as expected, bringing the cash rate to a level not seen since January 2015.
INTEREST RATE MARKET FUTURES
According to financial futures markets, there is a 32.0% probability that the Federal Open Market Committee will hike its fed funds rate by 50 basis points and a 68.0% probability that the rate will increase by 75 basis points at the September 21 policy meeting.
The inverted Treasury yield curve continues to flash warnings of economic risks ahead.
The bearish influence of the hawkish Federal Reserve is currently outweighing the bullish influence of a weakening U.S. economy.
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