Risk-On Mood Dominates Financial Markets
STOCK INDEX FUTURES
S&P 500 and Dow futures are higher on increased vaccine optimism.
The November Empire State manufacturing index was 6.3 when 13.5 was expected. The New York Federal Reserve conducts this monthly survey of manufacturers in New York state. Participants represent a variety of industries.
The technical picture remains positive for stock index futures.
The U.S. dollar is a little higher after recovering from overnight lows.
The greenback has been weakening since May due to rising debt levels coupled with expectations for an extended period of low interest rates.
Longer term, the U.S. dollar is likely to drift lower.
Brexit talks resumed in Brussels. Negotiations between the U.K. and the E.U. have failed to make progress on competition rules and fishing rights. The E.U. summit on November 19 is seen as the final deadline for a draft Brexit deal.
The flight to quality currencies, the Japanese yen and the Swiss franc are lower in light of today’s “risk-on” mood.
The Japanese yen is lower despite news that the Japanese economy expanded at its fastest rate in at least 40 years in the July-September period as private consumption and exports improved.
Japan’s economy expanded 5.0% in the third quarter of 2020 from the previous quarter, which is the first growth in four quarters.
INTEREST RATE MARKET FUTURES
Flight to quality longs are being liquidated in futures at the middle to the long end of the yield curve.
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.
Federal Reserve speakers today are Mary Daly at 12:45 and Richard Clarida at 1:00.
The yield curve is likely to steepen, which should put pressure on the 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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