Written Commentary
STOCK INDEX FUTURES
U.S. stock index futures are higher, reversing overnight pressure.
Personal income in August increased 0.2% when a gain of 0.3% was expected.
The 8:45 central time September PMI manufacturing final index is anticipated to be 60.5.
The 9:00 September Institute for Supply Management manufacturing index is predicted to be 59.8.
The 9:00 August construction spending report is estimated to show a 0.4% increase and the 9:00 September consumer sentiment index is anticipated to be 71.
The bears on this market point to the near-term prospects of central banks pulling back stimulus, concerns about the pace of the global economic recovery and the ongoing debates over the debt limit in Washington.
On the bullish side is the historically low fed funds rate of zero to 25 basis points.
Despite the recent pressure, the longer-term fundamental and technical aspects remain supportive for stock index futures.
CURRENCY FUTURES
After the U.S. dollar index advanced to a one-year high yesterday, the greenback is lower today as U.S. Treasury yields declined.
The euro currency is higher on news that consumer prices in the euro zone rose at the fastest pace in 13 years during September. Inflation in the euro area jumped to an annual 3.4% in September.
The European Central Bank has said its policymakers will in December decide what to do with a 1.85 trillion euro bond-buying program. Most economists expect the ECB will announce it will end the program in March, but beef up another longer-running stimulus program.
It has also indicated that it will keep interest rates in negative territory through 2023.
The Japanese yen is higher after a quarterly survey by the Bank of Japan showed sentiment among manufacturers is at its highest level in nearly three years.
The results of the Bank of Japan’s “tankan” survey found sentiment among large manufacturers increased to 18 from 14.
INTEREST RATE MARKET FUTURES
Futures at the long end of the curve are higher.
Federal Reserve Bank of Minneapolis President Neel Kashkari said he believes short-term interest rates will stay near zero for a few more years, but he supports a likely imminent pullback on the central bank’s bond-buying program. Mr. Kashkari said he doesn’t believe the Fed will need to raise rates until 2024.
Federal Reserve speakers today are Patrick Harker at 10:00 and Loretta Mester at 12:00.
There is a consensus view that the Federal Reserve will announce a tapering of its $120 billion a month in its asset-purchase program at its November policy meeting.
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