Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher.
U.S. based employers announced 49,795 job cuts in January, which is down 40% from the 82,307 cuts announced in January 2024, according to a report released today from global outplacement and business and executive coaching firm Challenger, Gray & Christmas, Inc. This is the lowest January job cut total since 2022, when 19,064 cuts were recorded for the month.
Jobless claims in the week ended February 1 where 219,000 when 215,000 were expected.
Nonfarm productivity in the fourth quarter increased at an annualized rate of 1.2% when up 1.8% was anticipated, and unit labor costs were up 3.0%, which compares to the predicted gain of 3.3%.
The U.S. economy is likely to be stronger than the consensus view, and will perform better than economies elsewhere in the world.
CURRENCY FUTURES
The U.S. dollar index is higher, snapping a three-session decline, as traders evaluate the U.S. economic and monetary outlook alongside global trade developments.
In a highly politicized environment we are seeing tendencies for breakouts in both direction failing to follow through.
In the longer term view, interest rate differentials are likely to underpin the greenback.
The volume of retail trade in the euro area declined by 0.2% month-over-month in December 2024, following an unchanged reading in November and missing market expectations of a 0.1% drop.
Factory orders in Germany increased 6.9% month-over-month in December 2024, which exceeded market expectations of a 2.0% increase. This was the first growth in three months and the strongest pace since September, 2024.
The Bank of England cut its benchmark bank rate by 25 basis points to 4.5% at its policy meeting today as expected, which marks the third interest rate cut since the start of its interest rate cutting cycle in August of last year. All nine members of the Monetary Policy Committee voted for a rate reduction.
The Japanese yen strengthened toward 152 per U.S. dollar on Thursday, reaching its best level in eight weeks as Bank of Japan board member Naoki Tamura said that the central bank must increase the policy rate to at least 1.0% in the latter part of fiscal 2025.
INTEREST RATE MARKET FUTURES
Futures are narrowly mixed with the yield on the 10-year U.S. Treasury note around 4.44% on Thursday, holding near the lowest level since mid-December, as traders assess the monetary policy outlook.
Federal Reserve speakers today are Christopher Waller at 1:30 and Lorie Logan at 4:10.
Financial futures market are predicting the Federal Open Market Committee will reduce its fed fund rate by 25 basis points at its June 18 policy meeting.
The fundamentals and technical aspects have improved for futures at mid-curve and at the long end of the yield curve.
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