Written Commentary
STOCK INDEX FUTURES
Stock index futures are lower, tracking a decline in Treasury futures, as traders continue to worry about inflationary pressures and await a big week of corporate earnings releases.
So far, approximately 7.0% of S&P 500 companies have reported actual first quarter results and 77.0% of these have topped earnings per share estimates, matching the five-year average percentage of beats, according to data from FactSet.
The 9:00 central time April housing market index is expected to be 78.
The dominant influences remain geopolitical tensions and the hawkish Federal Reserve.
CURRENCY FUTURES
The U.S. dollar index advanced to near a two-year high, underpinned by prospects of a more aggressive pace of Federal Reserve tightening.
The euro currency depreciated to under the $1.08 level for the first time since May 2020 due to uncertainty about the timing of interest rate hikes from the European Central Bank.
The British pound is lower and is close to a 17-month low despite the latest U.K. CPI report, which showed the inflation rate in the U.K. hit a 30-year high of 7.0% in March, pressuring the Bank of England to tighten faster.
The Japanese yen fell to its lowest level in nearly 20 years. Recent pressure on the yen is linked to the Bank of Japan’s firm commitment to maintain ultra-easy monetary policies, which contrast sharply with other major central banks that are hiking interest rates.
Also, Bank of Japan Governor Kuroda recently said the central bank is not ready to discuss an exit from monetary easing and a weak yen is positive overall for the Japanese economy.
Interest rate differential expectations remain bearish for the Japanese yen and lower prices are likely.
INTEREST RATE MARKET FUTURES
The 30-year Treasury bond futures fell to new lows for the move and are at the lowest level since December 2018.
James Bullard of the Federal Reserve will speak at 3:00.
Currently there is a 91.0% probability of a 50 basis point increase and a 9.0% probability of a 25 basis point hike in the fed funds rate at the Federal Open Market Committee’s ’s May 4 policy meeting.
Lower prices are likely across the board for the interest rate futures market as most major central banks are anticipated to tighten credit policies this year.
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