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July Nonfarm Payrolls Increase More Than Expected

STOCK INDEX FUTURES  

Stock index futures were lower in the overnight trade as tensions between the U.S. and China escalated. However, there was some recovery when the July nonfarm payrolls report showed an increase of 1,800,000 when a gain of 1,675,000 was expected and the unemployment rate was 10.2%, which compares to the anticipated 10.5%.

The 9:00 central time June wholesale trade report is estimated to show a 2.0% decline.

The 2:00 June consumer credit report is predicted to show an increase of $8.6 billion.

The technical picture remains constructive for stock index futures.

CURRENCY FUTURES

The U.S. dollar is rebounding after a persistent sell-off in the past few weeks. The U.S. dollar index tested a two-year low yesterday.

However, the U.S. dollar is higher today and there was limited support for the greenback when the July nonfarm payrolls report was released.

Some of the bears on the greenback are speculating that the Federal Reserve may loosen its approach to inflation, which is something analysts believe could happen at its next policy meeting in September.

The U.S. dollar is likely to drift lower from the morning higher prices.

The euro currency is lower despite news that German industrial production increased sharply in June, recovering for the second consecutive month. Total industrial output rose 8.9% in June from May when economists had forecast a 7.8% increase.

In addition, German exports rose 14.9% in June when economists had forecast a 14.4% increase in exports.

The British pound is lower on the belief that the Bank of England is still likely to provide further stimulus before the end of the year.

INTEREST RATE MARKET FUTURES

There was little market reaction to the U.S. employment numbers.

Futures are being supported by ideas that major central banks, including the Federal Reserve, are likely to keep interest rates low for an extended period.

The next Federal Open Market Committee meeting is scheduled for September 16. Financial futures markets are predicting there is a 90% probability that the FOMC will maintain its fed funds target rate at zero to 25 basis points.

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.

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