Written Commentary
STOCK INDEX FUTURES
Stock index futures are lower with reduced optimism surrounding Ukraine and Russia talks.
Mortgage applications in the U.S. declined 6.8% in the week ended March 25, which is the lowest level since December 2019, as mortgage rates surged by the most in eleven years. Applications to refinance a home loan fell 14.9% to the lowest since May 2019, while those to purchase a home edged up 0.6%.
The Automated Data Processing, Inc. employment report showed private businesses in the U.S. hired 455,000 workers in March, which is slightly higher than market forecasts of 450,000.
The third estimate for the fourth-quarter GDP was 6.9% growth when 7.1% growth was expected.
The dominant influences remain geopolitical tensions and the hawkish Federal Reserve.
CURRENCY FUTURES
The U.S. dollar index is lower as flight to quality longs are liquidated.
Germany’s consumer price inflation rate is expected to climb to 7.3% in March, which is the most since 1981 and well above market expectations of 6.3%.
The economic sentiment indicator in the euro area dropped by 5.4 points from a month earlier to 108.5 in March, which is below market expectations of 109. This was the lowest reading since March 2021, mainly due to plummeting consumer confidence.
Financial futures markets are becoming increasingly confident that the European Central Bank will start hiking interest rates this year.
Money markets expect the ECB’s deposit rate, currently at -0.50%, will increase to approximately 0.10% by the end of 2022.
Some analysts believe the risk of recession is currently greater in Europe than in the U.S.
The Japanese yen is higher after falling to a nearly 7-year low on Monday.
Interest rate differential expectations suggest the Japanese yen will trend lower longer term.
INTEREST RATE MARKET FUTURES
Federal Reserve speakers today are Thomas Barkin at 8:15 and Esther George at 12:00.
Traders are keeping a close watch on the yield curve, which measures the spread between short-term and long-term rates and is often seen as a strong indicator of sentiment about the prospects for economic growth. Yesterday the yield curve briefly inverted, meaning yields on two-year U.S. Treasuries briefly surpassed yields on the 10-year note for the first time since 2019.
Lower prices are likely for futures.
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.
