Written Commentary
STOCK INDEX FUTURES
Stock index futures are sharply higher due to the bullish October producer price index report.
The October producer price index increased 0.2% when an increase of 0.5% was expected, and the producer price index excluding food and energy was unchanged when up 0.4% was anticipated.
The November Empire State manufacturing index was 4.5 when negative 7.6 was predicted.
The fundamentals and technicals for stock index futures are improving.
CURRENCY FUTURES
The U.S. dollar index declined to its lowest level since August 15 due to speculation about a possible Federal Reserve policy shift.
The U.S. dollar has underperformed in the last two months as interest rate differential expectations have turned against the greenback.
The euro zone gross domestic product grew by 0.2% quarter-on-quarter in the third quarter as estimated.
Sentiment towards the German economy improved by more than expected in November but remained in negative territory for the ninth straight month. The ZEW think tank’s forward-looking sentiment index improved to -36.7 during the period, up from -59.2 in October. Economists predicted the figure would rise to -50.0.
The unemployment rate in the U.K. edged higher to 3.6% in the third quarter of 2022 from 3.5% in the previous period. This compares with market forecasts of 3.5%.
The Japanese economy shrank 0.3% in the third quarter of 2022, missing market consensus of 0.3% growth. This was the first gross domestic product contraction since the third quarter of 2021.
INTEREST RATE MARKET FUTURES
Futures are higher due to the bullish October producer price index report.
Federal Reserve Vice Chair Lael Brainard yesterday indicated the central bank could soon slow the pace of its interest rate hikes.
Patrick Harker of the Federal Reserve will speak at 8:00 this morning.
The technicals and fundamentals are looking more constructive for the interest rate market futures.
According to financial futures markets currently, there is an 83.0% probability that the Federal Open Market Committee will increase its fed funds rate by 50 basis points at the December 14 meeting and a 17.0% probability that the rate will be hiked by 75 basis points.
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