Written Commentary
INTEREST RATE MARKET FUTURES
Futures at the front end of the curve came under limited pressure yesterday in light of the hawkish Federal Open Market Committee meeting minutes. However, futures at the long end of the curve held up relatively well.
Federal Reserve Bank of Atlanta President Raphael Bostic will speak at 2:00.
Financial futures markets are predicting there is a 60% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its September 18 meeting. Yesterday the probability was 58%.
The fundamentals and technicals have improved for futures, especially for the 30-year U.S. Treasury bond futures.
STOCK INDEX FUTURES
Stock index futures fell yesterday after the release of the May 1 Federal Open Market Committee meeting minutes revealed Federal Reserve officials would need to hold interest rates at their current level for longer than they previously anticipated, after a series of disappointing inflation readings last month. In addition, some officials were open to raising interest rates if inflation reaccelerated.
However, it is a different story today as S&P 500 and NASDAQ futures advanced to new record highs in light of better than expected corporate earnings reports, especially for one large company in the high tech sector.
Jobless claims in the week ended May 18 were 215,00 when 220,000 were expected.
The 8:45 central time May manufacturing PMI is predicted to be 50.1.
The 9:00 April new home sales report is estimated to show 675,000.
The May Kansas City Federal Reserve manufacturing index will be released at 10:00. In April the index was -8.
The fundamentals and technicals remain supportive.
CURRENCY FUTURES
Despite yesterday’s hawkish Federal Open Market Committee meeting minutes, the U.S. dollar index Is lower today.
The HCOB euro zone Composite PMI Increased to 52.3 in May 2024, compared to 51.7 in April and beating estimates of 52.0.
The S&P Global U.K. Composite PMI declined to 52.8 in May, which is below the expected 54.
GOLD
Gold futures declined after traders reduced their expectations of interest rate cuts in light of a hawkish Federal Reserve. Minutes from the latest Fed meeting showed policymakers generally felt it could take longer than previously anticipated to gain greater confidence that inflation is moving towards its 2.0% target. Some officials indicated an inclination to hike interest rates if price pressures persist. This led to selling the non-interest bearing precious metal.
Follow-through selling in futures is likely to be limited due to fears of escalating geopolitical tensions in the Middle East. In addition, gold has been supported by buying from global central banks.
SILVER
A decline in silver prices was triggered by the minutes from the latest Federal Reserve meeting, which suggested some officials were considering raising interest rates. While the current policy involves keeping the benchmark policy rate steady, discussions of potential future rate hikes were reflected in the minutes released on Wednesday.
The longer term supply-demand situation remains supportive to silver as it is on track for its fourth consecutive year of production deficit.
COPPER
Copper futures retreated from the record high of near $5.20 on May 20. In spite of recent pressure, copper prices are still 25% higher year-to-date. Futures are likely to recover later today now that the hawkish Federal Open Market Committee minutes have been fully digested in the marketplace.
Interested in more futures markets? Explore our Market Dashboards here.
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.
