Written Commentary
STOCK INDEX FUTURES
U.S. stock index futures declined yesterday after the minutes of the December 14-15 Federal Open Market Committee meeting were released. The Federal Reserve discussed a faster timetable for raising interest rates this year, potentially as early as in March.
The Fed could more quickly scale back its asset purchases. The program is now on track to end in March instead of June.
Some officials believed the Fed should start shrinking its $8.76 trillion portfolio of bonds and other assets relatively soon after beginning to hike rates.
Analysts were not expecting the Fed to already be talking about letting the balance sheet run off, even as soon as the first rate hike.
Job cuts announced by U.S.-based companies increased 28.1% month-to-month to 19,052 in December of 2021, from 14,875 in November according to Challenger, Gray & Christmas, Inc.
Jobless claims in the week ended January 1 were 207,000 when 205,000 were expected.
The 9:00 central time November factory orders report is anticipated to show a 1.3% increase.
The 9:00 December Institute for Supply Management services index is estimated to be 67.0.
The longer-term fundamentals remain supportive despite the more hawkish Federal Reserve.
CURRENCY FUTURES
The U.S. dollar index and the euro currency remain in broad sideways patterns, and with interest rate differential expectations offering no clear advantage to either currency, the sideways trade will likely continue for the U.S. dollar and the euro currency over the near term.
Factory orders in Germany jumped 3.7% month-to-month in November of 2021, rebounding from a downwardly revised 5.8% decline in October and beating market forecasts of a 2.1% increase.
Producer prices in the euro area increased 1.8% from a month earlier in November 2021, easing from a 5.4% advance in October, but beating market expectations of a 1.2% gain.
A hawkish Bank of England will likely continue to support the British pound. The Bank of England surprised traders in December by hiking interest rates from record low levels. In addition, markets have priced in up to four Bank of England interest rate hikes in 2022.
An accommodative Bank of Japan will likely result in continuing pressure on the yen.
INTEREST RATE MARKET FUTURES
The interest rate market futures came under pressure yesterday when the minutes from the December FOMC meeting were released.
Some analysts are pointing out that the FOMC is tightening credit conditions at a time when the rate of growth in the economy may be slowing, citing the flattening yield curve since March 2021.
Also, several large investment banks have reduced their estimates of GDP growth.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
