Written Commentary
STOCK INDEX FUTURES
Stock index futures are lower.
The May National Federation of Independent Business small business optimism index was 90.5 when 89.7 was expected.
Today is the first day of the two-day Federal Open Market Committee meeting. A statement will be released tomorrow followed by Fed Chair Powell’s press conference.
The longer term fundamentals remain supportive to stock index futures.
CURRENCY FUTURES
Political uncertainty in Europe, in light of weekend elections across much of Europe, continue to pressure the euro currency against the U.S. dollar.
Yesterday, European Central Bank president Christine Lagarde said last week’s decision to lower its key interest rate was justified, but the decision does not mean interest rates are now on a linear declining path.
The labor market in the U.K. showed more signs of cooling in April. The jobless rate for the three months to April increased to 4.4% from 4.3% between January and March, which is the highest reading since the three months to September 2021. Economists predicted no change in the rate.
Regular compensation in the U.K., which excludes bonus payments, increased 6.0% year-on-year in the three months to April 2024, which was the same as in the previous two periods, and in line with forecasts.
Japan’s machine tool orders increased by 4.2% year-on-year in May 2024, which is a reversal from an 11.6% plunge in the previous month. This was the first growth in tool orders following declines in the previous 16 months.
The Bank of Japan will hold its policy meeting on Friday. Traders expect the BOJ will leave interest rates unchanged, although there is a small chance of an interest rate increase. The focus of attention will most likely be on the monetary policy statement and press conference.
INTEREST RATE MARKET FUTURES
The U.S. Treasury will auction 10-year notes today.
Financial futures markets are predicting there is a 53% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its September 18 meeting.
The long term fundamentals are bullish on balance, especially for futures at the long end of the yield curve.
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