STOCK INDEX FUTURES
Stock index futures declined due to hawkish comments from James Bullard of the Federal Reserve and another double digit consumer price index number out of the U.K.
Mortgage applications declined 8.8% in the week ended April 14, reversing from a 5.3% increase in the previous week, according to data from the Mortgage Bankers Association.
At 1:00 central time the Federal Reserve will release its “Beige Book” on the economy. This report is produced approximately two weeks before the monetary policy meetings of the Federal Open Market Committee. On each occasion, a different Federal Reserve district bank compiles anecdotal evidence on economic conditions from each of the 12 Federal Reserve districts.
Although prices are lower today, stock index futures have performed very well recently despite a variety of bearish news.
CURRENCY FUTURES
The U.S. dollar index advanced after Bullard’s hawkish comments.
The euro zone March consumer price index increased 0.9% on the month and 6.9% on the year, as anticipated.
Markets are now fully pricing in a 25 basis point rate hike from the European Central Bank next month, with around a 20% chance that the ECB raises rates by a larger 50 basis points.
The consumer price inflation rate in the U.K. eased to 10.1% year-on-year in March 2023, down from 10.4% in February but more than market expectations of 9.8%. The rate remained above the 10.0% mark for a seventh consecutive period.
The Bank of Japan’s tankan report published on April 3 showed the big manufacturers’ sentiment index worsened for a fifth consecutive quarter.
Canada’s annual inflation rate eased in March to 4.3%, its slowest pace in 19 months but is still more than double the Bank of Canada’s 2.0% target, data showed yesterday. The headline inflation figure fell from 5.2% in February, matching expectations.
INTEREST RATE MARKET FUTURES
The Treasury will auction 20-year bonds
Federal Reserve speakers today are Austin Goolsbee at 4:30 and John Williams at 6:00.
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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