Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher.
Mortgage applications in the U.S. increased 8.5% in the week ended March 4, according to data from the Mortgage Bankers Association.
The 9:00 central time January Job Openings and Labor Turnover Survey (JOLTS) is expected to show 10.9 million.
The dominant influences remain geopolitical tensions followed distantly by the hawkish Federal Reserve.
CURRENCY FUTURES
The advance in equity markets today caused investors to pull back from safe-haven assets. The U.S. dollar index consolidated its recent gains to trade near 99.000 today, hovering near levels last seen in May 2020.
The euro currency firmed after on Monday it fell to its lowest level since May 2020. There was some recent recovery on news that the European Union will consider jointly issuing bonds to finance energy spending and other projects. The EU is expected to reveal a plan later this week for the joint spending after leaders hold an emergency summit in Versailles.
The European Central Bank policy meeting will be held tomorrow.
The Japanese yen is lower after a report showed Japan’s economy grew at a slower pace than initially estimated in the fourth quarter of 2021 due to weaker-than-expected consumer spending.
Japan’s economy expanded 4.6% on an annualized basis in the fourth quarter of 2021. This compares to the preliminary estimate released in mid-February of annualized growth at 5.4% in the October-December quarter.
Interest rate differential expectations suggest the Japanese yen will trend lower.
INTEREST RATE MARKET FUTURES
The Treasury will auction 10-year notes today.
Federal Reserve Chairman Jerome Powell said last week that he planned to propose a quarter percentage-point rate increase at the central bank’s meeting this month.
Financial futures markets are predicting there is a 97.8% probability that the Federal Open Market Committee will hike its fed funds rate by 25 basis points and a 2.2% probability that the Fed will leave its fed funds rate unchanged at 0 to 25 basis points at its March 16 policy meeting. A few weeks ago the probability of a 50 basis point rate hike was over 50.0%.
Some analysts believe that if the rate of growth in the U.S. economy slows, and also globally, it will be difficult for the Federal Reserve and other major central banks to maintain ramped-up hawkish policies.
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