Written Commentary
STOCK INDEX FUTURES
U.S. stock index futures are lower but remain near all-time highs. Traders continue to look for indications of progress on an economic relief bill.
The November National Federation of Independent Business small business optimism index was 101.4 when 102.5 was expected.
Overall, stock index futures are performing well for the news suggesting higher prices are likely longer term.
CURRENCY FUTURES
The U.S. dollar is a little higher.
However, longer term the U.S. dollar is likely to trend lower due to expectations for an extended period of low interest rates and concerns over rising U.S. levels of debt.
The euro currency is slightly higher. German economic expectations increased sharply in December according to the ZEW economic research institute. The measure of economic expectations increased to 55.0 in December from 39.0 in November and beat economists’ forecast of 36.0.
The assessment of the current economic situation in Germany slightly worsened, falling to minus 66.5 in December from minus 64.3 in November. The reading compares to the economists’ estimate of minus 67.0.
The euro zone economy grew 12.5% in the three months to September 2020, recovering from a record decline of 11.7% in the previous period. It was the steepest rate of expansion since 1995.
Some analysts believe the euro will be underpinned by favorable euro zone trade numbers and that this bullish influence will outweigh the anticipated additional easing measures when the European Central Bank meets this Thursday.
U.K. Prime Minister Boris Johnson plans to travel to Brussels to meet with European Commission President Ursula von der Leyen, as negotiations continue.
Japan’s Prime Minister Yoshihide Suga said Japan will compile a new economic stimulus package worth $708 billion, following a combined $2.2 trillion from two previous packages in an effort to help push “new economic growth.”
INTEREST RATE MARKET FUTURES
Futures are mixed to higher.
There are no major Federal Reserve speakers scheduled for today.
The Treasury will auction three-year notes today.
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 zero to 25 basis points at the December 16 policy meeting.
In the months ahead the yield curve is likely to steepen, which should put pressure on 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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