Written Commentary
STOCK INDEX FUTURES
U.S. stock index futures are higher due to on balance stronger than expected corporate earnings reports.
October housing starts were 1.530 million when 1.460 million were expected and permits were 1.545 million, which compares to the anticipated 1.560 million.
Stock index futures are performing well on the news.
CURRENCY FUTURES
The U.S. dollar is lower for a fifth day due to concerns about the economic recovery, expectations for an extended period of low interest rates and concerns over rising U.S. levels of debt.
Longer term, the U.S. dollar is likely to drift lower.
The euro zone October consumer price index was up 0.2% as expected.
The British pound is higher after a report showed U.K. inflation increased by a little more than expected in October. Consumer prices increased 0.7% in annual terms, which is the highest level in three months after a 0.5% advance in September. Economists predicted a reading of 0.6%.
The Japanese yen is higher after a report showed Japan recorded a trade surplus in October, which was the fourth straight month of surplus and the largest since February.
Bank of Japan Governor Haruhiko Kuroda said the central bank will continue to buy exchange-traded stock funds as part of its monetary easing framework.
INTEREST RATE MARKET FUTURES
Federal Reserve Chair Jerome Powell said on Tuesday there was “a long way to go” to economic recovery.
The Treasury will auction 20-year bonds today.
Federal Reserve speakers today are John Williams at 11:15, James Bullard at 12:20, Robert Kaplan at 5:00 and Raphael Bostic at 6:00.
Financial futures markets are predicting there is almost a 100% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at the December 16 policy meeting.
In the months ahead the yield curve is likely to steepen, which should put pressure on futures at the long end of the curve, especially the 30-year Treasury bond futures, while futures at the short end of the curve are likely to hold steady.
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