Written Commentary
STOCK INDEX FUTURES
U.S. stock index futures pulled back on Wednesday after the S&P 500 and NASDAQ futures hit record highs yesterday. Some of yesterday’s gains were linked to renewed hopes for an economic aid package.
Federal Reserve Chairman Jerome Powell will testify before the House Financial Services Committee today at 9:00 central time following his appearance before the Senate Banking Committee yesterday.
During his testimony yesterday Mr. Powell emphasized that the Fed is encouraged by the recent economic data, but the central bank remains cautious and believes the U.S. economy is still a long way from “normalcy.” The Fed Chair also reinforced his previous comments that the Fed is ready to do more if necessary to support markets.
The November ADP national employment report showed private sector employment increased by 307,000 jobs from October to November when 420,000 were expected. This report is computed from ADP records that represent approximately 400,000 U.S. business clients and approximately 23 million U.S. employees working in all private industrial sectors.
Stock index futures are performing well on the news suggesting higher prices are likely.
CURRENCY FUTURES
The U.S. dollar is a little higher today after a hitting a 2 ½ year low yesterday.
Longer term, the U.S. dollar is likely to drift lower due to expectations for an extended period of low interest rates and concerns over rising U.S. levels of debt.
The euro currency advanced to its highest level since June 2018 before trimming the gains.
The British pound advanced to a three-month high before turning lower. The pound was supported earlier by better-than-expected manufacturing PMI data, along with hopes of a post-Brexit trade deal.
The Japanese yen is lower despite news that the consumer confidence index in Japan edged up to 33.7 in November, hitting the highest reading since February.
The Australian dollar is unchanged. The Organisation for Economic Co-operation and Development forecast the Australian economy will contract by 3.8% this year before rebounding by 3.2% in 2021.
INTEREST RATE MARKET FUTURES
Futures are steady to higher at the front end of the yield curve and are lower at the long end, especially the 30-year Treasury bond futures.
In addition to Federal Reserve Chair Powell, other Federal Reserve speakers today are Randal Quarles at 8:00, John Williams at 8,00, Patrick Harker at 9:00 and John Williams at 12:00.
The Federal Reserve will release its Beige Book on the economy at 1:00 central time. This book is produced approximately two weeks before the monetary policy meetings of the Federal Open Market Committee.
Financial futures markets are predicting there is almost a 100% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at zero to 25 basis points at the December 16 policy meeting.
In the months ahead the yield curve is likely to steepen, which should put pressure on futures at the long end of the curve, especially the 30-year Treasury bond futures, while futures at the short end of the curve are likely to hold steady.
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.
