Written Commentary
STOCK INDEX FUTURES
U.S. stock index futures are giving up some of the gains from Monday’s massive rally.
Stock index futures advanced sharply yesterday as Treasury yields retreated from their highs from last week and eased concerns that higher interest rates would undermine equity valuations.
S&P 500 futures had the best day since June.
Stock index futures are performing well for the news.
CURRENCY FUTURES
The euro currency is lower after weak economic data showed German retail sales fell for a second month in January, and at a faster than expected rate. In addition, unemployment numbers in Germany and Spain increased in February.
The seasonally adjusted number of unemployed people in Germany increased 9,000 to 2.752 million in February 2021, following a revised 37,000 decrease in the previous month and compared with market expectations of a 13,000 decline.
Euro zone consumer prices were higher in February compared with a year ago, rising for the second consecutive month. The European Union’s statistics agency said consumer prices in the currency area were 0.9% higher than in February 2020, following a 0.9% year-on-year rise in January.
The Japanese yen fell to a 7-month low against the U.S. dollar after a report showed capital spending in Japan fell by 4.8% year-on-year in the fourth quarter.
The Reserve Bank of Australia held its regularly scheduled policy meeting today. As expected, the RBA’s board left its official cash rate unchanged at 0.10%, and also kept its target for three-year government bonds at the same level. The RBA increased its quantitative easing program by buying an additional $100bn worth of Australian government bonds. Governor Philip Lowe said the, “The bank is prepared to make further adjustments to its purchases in response to market conditions.”
INTEREST RATE MARKET FUTURES
Federal Reserve Bank of Richmond President Thomas Barkin said the negative risks associated with the economic outlook have fallen. Mr. Barkin reiterated higher borrowing costs do not appear to be creating headwinds to growth. In addition, he said that while inflation is likely to increase in the spring he does not see any enduring increase that would be a problem.
In recent days, other Federal Reserve officials have affirmed the economy’s positive outlook and shrugged off the impact of rising yields in the Treasury bond market.
Federal Reserve speakers today are Lael Brainard at 12:00 and Mary Daly at 1:00.
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