Written Commentary
STOCK INDEX FUTURES
Analysts were at a loss yesterday to explain the sharply higher close despite the larger than expected increase in the consumer price index.
There are follow-through gains today despite mixed earnings results from big banks.
Retail sales in September were unchanged when up 0.2% was anticipated.
The 9:00 central time October consumer sentiment index is predicted to be 58.8.
The 9:00 August business inventories report is estimated to show a 0.9% increase.
Yesterday there was a one-day reversal pattern to the upside, which suggests the fundamentals may be improving.
CURRENCY FUTURES
The U.S. dollar index bounced back from its weekly low of around 112 touched in the prior session, as investors refocused on tightening expectations.
Wholesale prices in Germany increased 19.9% year-on-year in September, following an 18.9% increase in August and accelerating for the first time in five months.
The British pound advanced on reports that the U.K. government may reverse parts of its tax-cutting proposals.
The Japanese yen fell to its lowest since August 1990, as the Bank of Japan promised to maintain ultra-easy monetary policies despite clear indications that other major central banks will tighten further.
Bank of Japan Governor Kuroda said it is not appropriate for Japan to raise interest rates now.
INTEREST RATE MARKET FUTURES
Futures are being supported by the weaker than expected retail sales report.
Federal Reserve speakers today are Esther George at 9:00 and Lisa Cook at 9:30.
According to financial futures markets, there is a 97.0% probability that the Federal Open Market Committee will increase its fed funds rate by 75 basis points at the November 2 policy meeting and a 3.0% probability that the rate will be hiked by 50 basis points.
Yesterday there was a 2.0% probability that the FOMC could hike its fed funds rate by 100 basis points.
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