Written Commentary
STOCK INDEX FUTURES
Stock index futures are mostly higher.
Housing starts in March were 1.321 million when 1.480 million were expected, and building permits were 1.458 million when 1.510 million were anticipated.
Industrial production in March increased 0.4% as predicted, and capacity utilization was 78.4% when 78.5% was forecast.
Federal Reserve Chair Powell will speak at 12:15 central time when he participates in a moderated discussion before the Washington Forum on the Canadian Economy with Bank of Canada Governor Macklem. The topic is Economic Trends in North America.
In the short term, the bearish influence of higher interest rates for longer is taking a toll.
However, the longer term fundamentals are mostly bullish, while the technicals remain supportive to stock index futures.
CURRENCY FUTURES
The U.S. dollar index increased for a fifth straight session, hovering at its highest levels in over five months. There was only temporary pressure when the weaker than forecast housing starts and permits report was released.
The greenback has been supported by interest rate differentials that have turned more favorable. The Federal Reserve is likely to remain restrictive for longer, while other major central banks will probably become accommodative sooner.
The ZEW Indicator of Economic Sentiment for Germany increased to 42.9 in April 2024, beating forecasts of 35.9.
German wholesale prices fell by 3.0% in March compared with the same month last year.
The unemployment rate in the U.K. increased to 4.2% from December 2023 to February 2024, which is up from 3.9% in the three months to November and exceeding the market consensus of 4.0%.
The Japanese yen fell to new lows for the move today.
INTEREST RATE MARKET FUTURES
There was only temporary support for futures when the bullish housing starts report was released.
In addition to Federal Reserve Chair Powell, other Federal Reserve speakers today are Philip Jefferson at 8:00, John Williams at 11:30 and Thomas Barkin at 12:00.
Financial futures markets are predicting no change in the fed funds rate at the Federal Open Market Committee’s May, June and July meetings. However, there is a 72% probability of a rate reduction at the September 18 meeting.
The 30-year Treasury bond futures fell to new lows.
The fundamentals and technicals for futures remain bearish on balance, and lower prices for futures are likely.
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