Written Commentary
STOCK INDEX FUTURES
Stock index futures advanced after Russia said it pulled back some troops from the Ukrainian border. Russia’s Defense Ministry said some troops on the Ukrainian border were returning to their bases after completing training.
The January producer price index was up 1.0% when a 0.5% increase was expected, and on an annualized basis the producer price index increased 9.7% when up 9.2% was anticipated.
The February Empire State Manufacturing Index was 3.1 when 10.0 was estimated. The New York Federal Reserve conducts this monthly survey of manufacturers in New York state.
The dominant influences remain the hawkish Federal Reserve and tensions in Ukraine.
CURRENCY FUTURES
In light of an apparent easing of tensions in Ukraine, flight to quality longs were liquidated in the U.S dollar.
The ZEW Indicator of economic sentiment for Germany was 54.3 in February of 2022, which missed market expectations of 55. In addition, the assessment of the economic situation in Germany was -8.1, which compares to forecasts of -6.0.
The number of employed persons in the euro area increased 0.5% on the quarter to 161.8 million in the three months to December 2021, easing from 0.9% growth in the previous period.
The British pound is higher on news that the U.K. jobs report showed the job market remained strong. Payrolls increased 108,000 in January from the prior month.
Interest rate differential expectations suggest the long term trend for the Japanese yen is lower.
INTEREST RATE MARKET FUTURES
Futures are higher at the short end of the curve and lower at the long end.
Many market participants expect the Federal Open Market Committee will increase its fed funds rate seven times this year with the first hike likely at the March 16 meeting, or possibly earlier.
Even before the first rate hike from the FOMC, some analysts are thinking ahead as to how much the economy may slow in response to higher interest rates and how that will affect inflation several years out. According to the monthly survey of consumer expectations from the Federal Reserve Bank of New York, U.S. consumer inflation expectations for the year ahead decreased for the first time in 14 months to 5.8% in January of 2022 from 6.0% in the previous two months. Also, three-year ahead inflation expectations decreased by 0.5% to 3.5%, which is the largest one month decline since 2013.
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