Written Commentary
STOCK INDEX FUTURES
Futures are under pressure in a risk-off mode, as investors continue to adjust to geopolitical developments.
The 8:45 central time final manufacturing PMI for February is expected to be 57.5.
The 9:00 February Institute for Supply Management manufacturing index is anticipated to be 58.0 and the 9:00 January construction spending report is predicted to show a 0.2% increase.
Traders are looking ahead to Federal Reserve Chair Jerome Powell’s appearance in Congress on Wednesday for clues on the timing and magnitude of interest rate increases.
Powell will testify to the House Financial Services Committee on Wednesday at 9:00 central time and on Thursday before the Senate Banking Committee at 9:00. His main topics will be inflation, economic growth, and geopolitical risks to the economy.
I believe any surprises from Powell will be on the dovish side considering the uncertainties surrounding the situation in Eastern Europe.
CURRENCY FUTURES
Flight to quality longs are being established in the U.S. dollar, as investors continue a move to safety.
The yield on the German 10-year Bund fell to below 0%, which is the lowest in four weeks, as investors rush for safety and further reduced bets on interest rate hikes from the European Central Bank this year.
The annual inflation rate in Germany increased to 5.1% in February of 2022 from 4.9% in the previous month, which was in line with market expectations.
When the geopolitical issues are reduced it will be the interest rate differential expectations influence that will once again dominate to take the British pound higher and the Japanese yen lower.
INTEREST RATE MARKET FUTURES
Flight to quality buying is dominating, taking futures mostly higher.
Raphael Bostic of the Federal Reserve will speak at 1:00.
In light of the ongoing geopolitical tensions, there is growing pressure on hawkish central banks to slow their withdrawal of accommodation.
Financial futures markets are predicting there is an 92.5% probability that the Federal Reserve will hike its fed funds rate by 25 basis points and a 7.5% probability of a 50 basis point hike at its March 16 policy meeting. A few weeks ago the probability of a 50 basis point rate hike was over 50%.
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.
