Written Commentary
FINANCIAL FUTURES OVERNIGHT
STOCK INDEX FUTURES
In our opinion stock market has been fortunate to avoid a wholesale liquidation from this week’s spike in interest rates. However, with UK, EU, Japanese, and US sovereign bond yields jumping the most in a week since March the prospect of “rotation” from stocks to bonds is growing by the hour. Certainly, the S&P managed to reject yesterday’s probe below 7600 but an early slide back below that level today leaves the index poised to make a fifth straight day of lower lows and lower highs.
CURRENCIES
While the dollar is managing to hold this week’s modest recovery and is seeing support from sharp gains in US treasury yields, the dollar is facing broad competition from many G7 central banks threatening higher rates. It is possible that the surge in oil prices and ongoing military exchanges have rekindled war premium buying in the dollar and it is also possible that last week’s payroll report gives credence to the prospects the Fed will raise rates next week and therefore the dollar retains a very slim fundamental edge.
TREASURY FUTURES
Not surprisingly, the threat from the US Treasury Secretary to cap rising treasury yields has resulted in the market moving decisively to test his resolve. In fact, yesterday’s jump in treasury yields the most significant day over a drop in yields since May 15th and the bear camp has plenty of fundamental backing to continue the slide. Certainly, the market is short-term oversold from this week’s wash, but fundamental repricing short-term technical issues can be written. In retrospect, the inflation threat has been given validity this week with diesel fuel prices hitting six dollars per gallon for the first time ever and August producer price index readings coming in above acceptable Fed targets of 0.4%. While any may argue that the excluding food and energy component highlights concentrated inflation from energy prices, the fact is steady or even higher energy prices are likely to rekindle downstream price pressures.
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.
