Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher due to reduced geopolitical tensions.
The 8:45 central time July PMI composite index is expected to be 47.0.
The 9:00 June factory orders report is anticipated to show a 1.1% increase.
The 9:00 July Institute for Supply Managements services index is estimated to be 53.
Despite an ongoing hawkish tone to Federal Reserve officials’ comments, stock index futures are holding up well.
CURRENCY FUTURES
Euro zone retail sales fell in June due to rising inflation and declining consumer confidence among households. The volume of retail sales fell 1.2% in June compared with the previous month. Economists had forecast retail sales would be steady.
Retail sales data for May was revised to a 0.4% increase, instead of the 0.2% on-month gain previously estimated.
Germany recorded a €7.7 billion trade surplus in June of 2022, which is half a €15.9 billion surplus a year earlier, as imports jumped 24.9% to €128.3 billion, and exports increased at a slower 14.6% to €136 billion.
The British pound is higher. There is underlying support for the pound on the belief that the Bank of England will hike its key interest rate by 50 basis points at its policy meeting on Thursday. This would be the biggest increase in 27 years, pushing borrowing costs to 1.75%, the highest level since 2009.
INTEREST RATE MARKET FUTURES
After making a four month high early yesterday, the 30-year Treasury bond futures came under pressure when Federal Reserve officials said the central bank was likely to continue raising interest rates. Federal Reserve officials said they expected to keep lifting borrowing costs through at least early next year to slow the economy and bring down high inflation.
Patrick Harker of the Federal Reserve will speak at 9:30.
According to financial futures markets, there is a 52.5% probability that the Federal Open Market Committee will hike its fed funds rate by 50 basis points and a 47.5% probability that the rate will increase by 75 basis points at the September 21 policy meeting.
Higher prices are likely across the board for the interest rate market futures, despite the hawkish Fed, as the U.S. economy continues to weaken.
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