Written Commentary
STOCK INDEX FUTURES
Stock index futures are mixed. Fears of a slowing global economic recovery are being offset by a banner start to the corporate earnings season.
Of the 82 companies in the S&P 500 that have reported results, earnings per share growth has been 105% on a 16% increase in sales, according to FactSet.
Jobless claims in the week ended July 17 were 419,000 when 350,000 were expected and the June Chicago Federal Reserve national activity index was .09 when 0.30 was anticipated.
The 9:00 June leading indicators report is predicted to show an increase of 1.0% and the 9:00 June existing home sales report is estimated to be 5.9 million.
The 10:00 July Kansas City Federal Reserve manufacturing index is predicted to be 27.
In recent months, stock index futures have shown a tendency to recover from bearish news.
CURRENCY FUTURES
The U.S. dollar index is holding up relatively well despite weak economic reports today.
The U.S dollar remains near a four-month high, as demand for safe-haven assets remains strong.
In the weeks ahead it is likely that the flight to quality influence that the greenback has enjoyed will dominate over other market influences.
The European Central Bank held its policy meeting today. The ECB signaled that it would support the euro zone economy by keeping interest rates low for longer.
The ECB’s decision is in part a response to its new policy framework, unveiled two weeks ago, which aims to give bank officials additional powers to stimulate the economy when inflation is too low.
The central bank said in a statement that it won’t increase its key interest rate, currently at minus 0.5%, until inflation moves much closer to its target of 2.0% and looks likely to remain at that level.
The ECB also reiterated its pledge to buy euro zone debt under an emergency bond-buying program through at least March 2022.
It appears that the ECB’s new strategy could possibly be paving the way for more, but not less, asset purchases.
The Confederation of British Industry’s order book balance eased to +17 in July, but remained close to over the three-decade high of +19 that was hit in June, according to the latest monthly CBI Industrial Trends Survey.
INTEREST RATE MARKET FUTURES
Futures firmed when today’s weaker than expected economic reports were released.
Safe-haven flows have supported futures in recent weeks.
Substantial gains in the 30-year Treasury bond futures since May and a flattening yield curve suggests the rate of inflation may be peaking and the rate of growth in the global economy may be slowing.
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