Written Commentary
STOCK INDEX FUTURES
Stock index futures are sharply lower on Friday as the trade war escalated further. China announced extra 34% tariffs on U.S. goods from April 10th.
Nonfarm payrolls in March increased 228,000 when a gain of 131,000 was expected, and manufacturing payrolls were up 1,000 when an increase of 3,000 was anticipated.
Private payrolls advanced 209,000 when an increase of 115,000 was forecast.
The unemployment rate was 4.2% as expected, and average hourly earnings increased 0.3% as estimated.
Federal Reserve Chair Jerome Powell will speak on the economic outlook before the Society for Advancing Business Editing and Writing Annual Conference at 10:25 central time.
While traders currently are focusing on the negative implications of trade tariffs and geopolitical issues, a more accommodative Federal Open Market Committee will support futures later this year.
CURRENCY FUTURES
The U.S. dollar index was lower in the overnight trade. However, there was recovery when the stronger than expected U.S. employment report was released. Morning strength will probably not follow through, and lower prices for the greenback are likely.
The fundamentals for the U.S. dollar remain bearish.
The Japanese yen is sharply higher today due to a flight to safety flow of funds.
In addition, the yen was supported by comments from Bank of Japan Deputy Governor Uchida when he said the central bank will raise interest rates if underlying inflation heightens against a background of continued improvements in economy.
INTEREST RATE MARKET FUTURES
Flight to safety buying is coming into futures across the board. Futures have extended price gains after recent breakouts to the upside on the daily charts.
The yield on the U.S. 10-year Treasury note declined to around 3.89%, which is the lowest level since mid-October.
There was only limited pressure on futures when the bearish U.S. employment data were released.
In addition to Federal Reserve Chair Powell, other Federal Reserve speakers today are Michael Barr at 11:00 and Christopher Waller at 11:45.
The Federal Open Market Committee will probably more aggressively move to accommodation this year.
The FOMC will likely lower its key interest rate four times in 2025, with the first reduction at its June policy meeting.
The fundamentals and technicals remain bullish for the interest rate market futures.
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