Written Commentary
STOCK INDEX FUTURES
Global equity markets declined after the Federal Reserve’s downbeat assessment of the near-term outlook for the U.S. economy. NASDAQ futures pulled back from its record high of over 10,000.
The Federal Open Market Committee yesterday said it sees gross domestic product shrinking 6.5% in 2020 but bouncing back to a 5.0% gain in 2021 followed by a 3.5% advance in 2022, both are well above the economy’s longer-term trend.
Jobless claims in the week ended June 6 were 1,542,000 when 1,565,000 were expected.
The producer price index increased 0.4% in May, which compares to the anticipated 0.1% gain.
In recent weeks, U.S. stock index futures have shown a tendency to bounce back from bearish news.
CURRENCY FUTURES
The euro is higher despite the belief that there could be increased political friction over the European Union’s aid package.
The euro is higher in spite of news that Italian April industrial production plunged.
The U.S. dollar appears to be bottoming and the euro currency appears to be topping.
In light of lower stock index futures, the flight to quality currencies, the Japanese yen and the Swiss franc are rallying.
INTEREST RATE MARKET FUTURES
Flight to quality buying is coming into the 30-year Treasury bond futures.
Some of the gains were due to the FOMC when yesterday policy makers assured investors that interest rates will stay near zero until the end of 2022.
Fed Chair Powell said policy makers are “not even thinking about thinking about raising rates.”
The Treasury will auction 30-year bonds today.
Now that the bullish FOMC news is out of the way, futures are likely to drift lower from the current higher levels.
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