Written Commentary
STOCK INDEX FUTURES
December S&P 500 futures are mixed.
The September final demand producer price index was unchanged when up 0.2% was expected, and the producer price index excluding food and energy increased 0.2% as anticipated.
The 9:00 central time October consumer sentiment index is forecast to be 70.8.
Third quarter earnings season kicks off today with quarterly results from big banks.
CURRENCY FUTURES
Yesterday the U.S. dollar index advanced to its highest level since August 8. Today the greenback came under only limited pressure when the bearish September producer price index was released.
Interest rate differentials remain supportive to the U.S. dollar.
The inflation rate in Germany increased 1.6% in September. The 1.9% rate of change that was reported in August was already below the 2.0% mark.
The U.K. economy expanded 0.2% month-to-month in August, which was in line with expectations, after showing no growth in July and June.
The consumer confidence indicator in Switzerland improved by 0.9 points to -33.7 in September, which is up from -34.6 in August and is better than market prediction of -33.
INTEREST RATE MARKET FUTURES
This morning’s September producer price index report supported futures at the front end of the yield curve and pressured futures at the long end of the curve, especially the 30-year U.S. Treasury bond futures.
Yesterday Federal Reserve Bank of Atlanta President Raphael Bostic indicated he is comfortable with the Federal Open Market Committee pausing its path of interest rate cuts at the November policy meeting.
Federal Reserve speakers today are Austan Goolsbee at 8:45, Lorie Logan at 9:45 and Michelle Bowman at 12:10.
Despite recent comments from Raphael Bostic, it is widely expected that the Federal Open Market Committee will reduce its key interest rate again at its November meeting.
Currently there is an 82% probability that the FOMC will lower its fed funds rate by 25 basis points at its November 7 policy meeting, and there is an 18% chance that the FOMC will keep its key interest rate unchanged at 4.75% – 5.00%.
Futures at the front end of the yield curve are likely to continue to gain on futures at the long end of the yield curve.
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