Written Commentary
STOCK INDEX FUTURES
Stock index futures are lower after hawkish comments from U.S. Federal Reserve Governor Christopher Waller. He said that until there is a substantial reduction in inflation, 50 basis point hikes are on the table at every Fed meeting.
This is in contrast to last week when the release of the Fed’s May 4 policy meeting on Wednesday indicated the Federal Open Market Committee would hike the fed funds rate by 50 basis points at the June and July meetings but could pause its fed funds rate hike schedule later this year.
The 8:45 central time May Chicago PMI is expected to be 57.1.
The 9:00 May consumer confidence index is anticipated to be 104.0 and the 9:30 May Dallas Federal Reserve manufacturing index is predicted to be 2.6.
I think stock index futures are overreacting to Christopher Waller’s comments and a recovery is likely later today.
CURRENCY FUTURES
After the U.S. dollar index fell to a three-week low last week, it rebounded today due to Christopher Waller’s hawkish interest rate commentary.
The greenback will probably give back some of the overnight price gains later today.
The euro currency is lower despite news that the annual inflation rate in the euro area increased to 8.1% in May, a record high, and well above market forecasts of 7.7%.
Canada’s first quarter gross domestic product increased 3.1% when a gain of 5.5% was estimated.
INTEREST RATE MARKET FUTURES
Financial futures markets are predicting there is a 96.7% probability that the Federal Open Market Committee will hike its fed funds rate by 50 basis points and a 3.2% probability that the rate will increase by 75 basis points at the June 15 policy meeting.
The interest rate market futures appear to be making a bottom on the charts, and the fundamentals are improving.
I think futures have overreacted on the downside today to Christopher Waller’s hawkish comments and at least a partial recovery is likely.
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.
