Smaller Than Expected CPI Increase
STOCK INDEX FUTURES
Stock index futures edged down in the overnight trade on worries of slowing global economic growth. However, prices quickly advanced on news that the August consumer price index report showed an increase of 0.3% when a gain of 0.4% was expected.
The annual inflation rate in the U.S. eased to 5.3% in August from 5.4% reported in June and July.
The August National Federation of Independent Business (NFIB) index was 100.1 when 99.0 was expected. The small business optimism index is compiled from a survey that is conducted each month by the National Federation of Independent Business of its members.
The fundamental and technical aspects remain supportive for stock index futures.
The U.S. dollar declined when the smaller than anticipated increase in the U.S. consumer price index was reported.
The British pound is higher on news that the U.K. unemployment rate fell to 4.6% in the three months to July, which is the lowest level since the June-August 2020 period and was in line with market expectations. The number of unemployed people was down by 86,000 on the quarter to 1.55 million, while employment levels increased 183,000 to 32.36 million, which is more than the market consensus of a 178,000 increase.
The Australian dollar depreciated after Reserve Bank of Australia Governor Philip Lowe reduced expectations of higher interest rates before 2024. Mr. Lowe also said the RBA would continue to taper its bond-buying over time and would likely end the program altogether sometime next year.
The Canadian dollar is higher despite news that manufacturing sales in Canada in July fell 1.5% from a month earlier, compared to a preliminary estimate of a 1.2% decrease.
INTEREST RATE MARKET FUTURES
Futures firmed when the smaller than predicted U.S. consumer price index was reported.
Traders continue to focus on when the Federal Reserve will taper its $120 billion a month in asset purchases.
Many Fed officials have said recently that they could begin reducing their monthly purchases of bonds by the end of this year if the economy performs as they anticipate.
Philadelphia Federal Reserve Bank President Patrick Harker is the latest official to say he would support the start of tapering this year following Dallas Fed Bank President Robert Kaplan and New York Fed Bank President John Williams.
Some analysts pushed back expectations for when the Federal Reserve will begin reducing bond purchases after a recent disappointing payrolls report and today’s smaller than estimated increase in the U.S. consumer price index.
Also, the longer term trend is higher for the 30-year Treasury bond futures despite the tapering talk, as the rate of growth in the global economy slows. The 30-year Treasury bond futures remain in a two-month trading range, but are likely to ultimately break out to the upside.
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.