Written Commentary
STOCK INDEX FUTURES
Stock index futures are mixed.
The April Empire State manufacturing index showed an increase in activity for the first time in five months coming in at 10.8 when negative 18.3 was expected.
The 9:00 central time April housing market index is anticipated to be 45.
Stock index futures have performed very well considering recent hawkish comments from Federal Reserve officials.
CURRENCY FUTURES
The U.S. dollar index bounced from Friday’s one-year low due to hawkish comments from Federal Reserve officials.
The euro currency stabilized around the $1.10 level, remaining close to an over 12-month high touched on April 14, as the European Central Bank is expected to continue hiking interest rates. Euro zone policymakers are likely to deliver two or three 25 basis point rate increases by mid-year to combat inflation, despite the headline inflation rate in the euro area was the lowest in 13 months in March.
Production in Germany’s engineering sector increased by 3.2% in the first two months of 2023 compared with the same months last year.
The Reserve Bank of Australian will likely keep its policy rate unchanged again in May. In recent speeches, Governor Lowe and Deputy Governor Bullock made it clear that the central bank wants to pause to assess the impact of the rapid interest rate hikes and the economic outlook.
INTEREST RATE MARKET FUTURES
The pressure on futures on Friday with follow-through today is linked to comments from Federal Reserve Governor Christopher Waller when he said policymakers need to keep raising borrowing costs.
Thomas Barkin of the Federal Reserve will speak at 11:00. Most likely his comments will be hawkish, as well.
Underlying support for futures remains due to the belief that central banks will not be able to keep raising interest rates much longer.
Markets are currently pricing in a 25 basis point rate increase at the Fed’s May 3 policy meeting. However, easier credit conditions from the Federal Reserve are likely later this year.
The technicals and fundamentals remain supportive.
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