Flight to Quality Supports Interest Rates
STOCK INDEX FUTURES
Stock index futures declined after U.S.-China relations showed signs of further deterioration, and as investors questioned whether Congress would reach an agreement on the next stimulus package before lawmakers start their summer break.
Fiscal stimulus discussions in Washington will continue this week before current programs are set to expire at the end of the month.
Homebuyer demand pushed mortgage application volume up 4.1% last week, according to the Mortgage Bankers Association.
The 9:00 central time June existing home sales report is expected to show 4.8 million.
In recent weeks stock index futures have shown a tendency to recover from bearish news.
The euro currency advanced to an 18-month high due to enthusiasm after the E.U. recovery deal was agreed on Tuesday.
E.U. leaders agreed to jointly borrow €750 billion ($857.8 billion) of funds for a fiscal stimulus package. In addition, an agreement was reached on the E.U.’s budget over the next seven years, amounting to €1074 billion. This is the largest ever joint borrowing undertaken by the E.U.
The British pound is lower after reports that the U.K. is close to abandoning hope of a Brexit trade deal with the E.U.
The Australian dollar is higher after a report showed Australian preliminary June retail sales increased 2.4%.
INTEREST RATE MARKET FUTURES
Flight to quality buying is coming into futures as a result of rising tensions between the U.S. and China.
The yield on 10-year Treasury notes fell to 0.591% from 0.606% on Tuesday in an indication of continued caution among investors.
There are no Federal Reserve speakers scheduled for today.
The Treasury will auction 20-year bonds today.
According to financial futures markets there is a 95.6% probability that the Federal Open Market Committee will leave its fed funds rate unchanged at zero to 25 basis points at its July 29 policy meeting.
My analysis suggests there will be no change in the fed funds rate at the July meeting.
Overall, futures appear to be caught between the bearish influence of more government stimulus and the bullish influence of ongoing historically accommodative central bank policies.
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.