Written Commentary
STOCK INDEX FUTURES
On Friday S&P 500 futures advanced to a new annual high.
The 8:45 central time June PMI manufacturing final is expected to be 46.3.
The 9:00 June Institute for Supply Management manufacturing index is anticipated to be 47.3 and the 9:00 May construction spending report is predicted to show a 0.5% increase.
Stock index futures continue to perform better than the news would suggest.
CURRENCY FUTURES
Euro zone manufacturing activity contracted faster than initially thought in June. The downturn was broad based with surveys showing factory activity in all four of the euro zone’s largest economies contracted last month. The final manufacturing Purchasing Managers’ Index declined to 43.4 when 43.6 was predicted.
The rate of decline in the U.K.’s manufacturing sector steepened in June. The U.K. Manufacturing Purchasing Managers’ Index fell to 46.5 from 47.1 in May, which is its lowest reading this year, but was revised up from an earlier preliminary “flash” estimate of 46.2.
This marked an 11th consecutive month under the 50 threshold for growth.
The annual inflation rate in Switzerland eased to 1.7% in June 2023, which is the lowest since January 2022, from 2.2% in the previous month and slightly below the market forecasts of 1.8%. In spite of this, economists expect the Swiss National Bank to raise interest rates at least one more time at its next policy meeting in September.
Japan’s factory activity contracted in June. The final au Jibun Bank Japan manufacturing purchasing managers’ index was 49.8, falling below the 50.0 threshold that separates growth from contraction, after May’s reading of 50.6.
INTEREST RATE MARKET FUTURES
Futures are lower after Fed Chair Powell recently reinforced the belief that interest rates will increase again this year, signaling the possibility of two more rate hikes.
Several portions of the U.S. Treasury yield curve have become even more inverted recently, which is a sign that investors are becoming increasingly worried about an economic slowdown.
Financial futures markets are predicting there is a 90% probability that the Federal Open Market Committee will hike its fed funds rate by 25 basis points at the July 26 meeting, and there is a 10% chance that the fed funds rate will remain unchanged.
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