Written Commentary
STOCK INDEX FUTURES
Stock index futures are mixed as first quarter earnings season kicks off.
Mortgage applications were lower for a fifth straight week and declined 1.3% in the week ended April 8.
The March producer price index increased 1.4% when up 1.1% was expected, and on an annualized basis the producer price index advanced 11.2% when a gain of 10.6% was anticipated.
The April Atlanta Federal Reserve’s business inflation expectations survey will be released at 9:00 central time. Last month the expectation was 3.8%.
The technical aspects are supportive, but countering this are geopolitical tensions and the hawkish Federal Reserve.
CURRENCY FUTURES
The U.S. dollar index advanced to a new two-year high, underpinned by recent hawkish comments from Federal Reserve officials and flight to quality buying.
The U.K.’s inflation rate increased to a new three-decade high in March. Consumer prices were 7.0% higher in March than a year ago, which is a pickup from the 6.2% rate of inflation in February.
The Japanese yen declined to its lowest level in nearly 20 years, as the Bank of Japan’s firm commitment to maintain ultra-easy monetary policies contrast sharply with other major central banks that are hiking interest rates. The BoJ has also repeatedly intervened to keep benchmark bond yields around zero.
Interest rate differential expectations remain bearish for the Japanese yen and lower prices are likely.
INTEREST RATE MARKET FUTURES
The Treasury will auction 30-year bonds today.
Thomas Barkin of the Federal Reserve will speak at 11:30 this afternoon.
Currently there is an 86.6% probability of a 50 basis point increase and a 13.4% probability of a 25 basis point hike in the fed funds rate at the May 4 Federal Open Market Committee meeting.
Lower prices are likely longer term across the board for the interest rate futures market as most major central banks are anticipated to tighten credit policies this year.
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