Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher in advance of Federal Reserve Chair Jerome Powell’s monetary policy testimony before the House Financial Services Committee at 9:00 central time.
Fed Chair Powell told lawmakers during a Senate hearing yesterday that higher interest rates could eventually tip the economy into a recession, saying it was “certainly a possibility.”
Jobless claims in the week ended June 18 were 229,000 when 225,000 were expected.
The 8:45 June PMI composite flash is anticipated to be 56.3 for manufacturing and 53.6 for the services index.
The June Kansas City Federal Reserve manufacturing index will be released at 10:00. In May the index was 23.
The rate of inflation remains the key driver to this market. A likely bottom could come when there are indications that the rate of inflation is slowing, which could influence the Federal Reserve to become less hawkish.
CURRENCY FUTURES
The U.S. dollar index is higher as interest rate differential expectations remain favorable to the greenback.
The euro currency declined on news that the S&P Global euro zone Manufacturing PMI dropped to 52 in June from 54.6 in May, which is the lowest in 22 months and below market expectations of 53.9.
The S&P/CIPS U.K. Manufacturing PMI fell to a 23-month low 53.4 in June from 54.6 in May, missing market expectations of 53.7.
The Confederation of British Industry’s distributive trades survey’s retail sales balance in the U.K. fell to -5 in June from -1 in May, which is the third successive month volumes failed to grow and below market expectations of -3.
INTEREST RATE MARKET FUTURES
Major government bond yields continued to decline as investors moved funds to safe-haven assets as fears grow that tightening monetary conditions will drag global economies into a recession.
There is a 90.9% probability that the Federal Open Market Committee will hike its fed funds rate by 75 basis points and a 9.1% probability that the rate will increase by 50 basis points at the July 27 meeting.
Copper, which is a metal with a history of predicting economic downturns, fell to below $3.85 per pound, which is the lowest since early 2021 due to increasing fears of a global economic slowdown.
Currently the Federal Reserve’s focus is clearly on inflation, while a slowing economy will be problem for the Fed to deal with later.
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.
