Written Commentary
STOCK INDEX FUTURES
International stock markets tumbled on Friday due to renewed concerns about the coronavirus.
However, today stock index futures gained as investors reassessed the likely implications of a new variant of Covid-19.
The 9:00 central time October pending home sales report is expected to show a 0.7% increase and the 9:30 November Dallas Federal Reserve manufacturing index is anticipated to be 19.5.
Follow-through gains are likely today.
The long-term fundamentals remain bullish on balance for stock index futures.
CURRENCY FUTURES
On November 24 the U.S. dollar index advanced to its highest level since July 2020. Much of the strength is linked to bullish interest rate differential expectations.
The U.S. dollar index is likely to trend higher today and also in the weeks ahead.
The economic sentiment indicator in the euro area dropped by 1.1 points from a month earlier to 117.5 in November 2021, which is the lowest in six months and was in line with market expectations.
Germany’s consumer price inflation rate is predicted to climb to 5.2% year-on-year in November, which is up from 4.5% in the previous month and above market expectations of 5.0%.
The euro currency remains near a 16-month low, as European Central Bank President Lagarde continues to push back against expectations of policy tightening in the euro zone. Recently the ECB chief said it does not make sense to tighten policy, as inflation pressures in the euro zone are expected to fade.
Lower prices are likely for the euro currency.
The British pound remains near an 11-month low due to doubts whether the Bank of England will raise interest rates at its December 16 policy meeting. Governor Andrew Bailey recently made comments indicating he is taking a more careful view on policy than in his remarks earlier about the likelihood that policy will tighten soon.
The number of mortgage approvals for house purchases in the U.K., which is an indicator of future borrowing, dropped further to 67,200 in October 2021, from a revised 71,900 in the previous month and below market expectations of 71,250. This was the lowest since June 2020.
The Japanese yen declined, as investors liquidated safe haven assets.
INTEREST RATE MARKET FUTURES
Flight to quality longs that were established on Friday were partially liquidated today.
John Williams of the Federal Reserve will speak at 2:00.
Follow-through weakness is likely for futures today, although the longer-term trend appears to be higher.
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