Written Commentary
STOCK INDEX FUTURES
Stock index futures advanced in the overnight trade due to better than expected earnings reports from major tech companies. There were additional gains when the weaker than expected U.S. employment numbers were released due to the belief that a weaker economy will influence the Federal Reserve to become more accommodative.
Nonfarm payrolls in October increased 12,000 when a gain of 125,000 was expected. Nonfarm payrolls in the previous month were revised substantially lower to an increase of 78,000 when up 254,000 were previously reported.
Private payrolls in October fell 28,000 when an increase of 90,000 was estimated. September private payrolls were also revised lower to an increase of 192,000 when up 223,000 was originally reported.
October manufacturing payrolls declined 46,000 when down 30,000 was anticipated.
The unemployment rate was 4.1% as expected.
The 8:45 central time October PMI manufacturing final is expected to be 47.8.
The 9:00 October Institute for Supply Management manufacturing index is anticipated to be 47.6, and the 9:00 September construction spending report is estimated to show a 0.1% increase.
CURRENCY FUTURES
The U.S. dollar index advanced in the overnight trade. However, the greenback quickly came under pressure when the 7:30 U.S. employment report was released.
Much of the strength last month in the U.S. dollar was linked to flight to quality buying due to geopolitical tensions in the Middle East and favorable interest rate differentials.
The fundamentals and technicals remain supportive to the U.S. dollar in the longer term.
The U.S. dollar is likely to recover from the morning pressure.
The annual inflation rate in Switzerland eased to 0.6% in October 2024, which is the lowest since June 2021, and compares to forecasts of 0.8%.
The Nationwide House Price Index in the U.K. increased by 2.4% year-on-year in October 2024, easing from a 3.2% gain in September and coming in under the predicted 2.8% advance.
It is widely expected that the Reserve Bank of Australia will hold its cash rate unchanged at 4.35% at its November 5 policy meeting.
INTEREST RATE MARKET FUTURES
Futures quickly firmed when the weaker than expected U.S. employment numbers were released.
Lorie Logan of the Dallas Federal Reserve will speak at 8:45 AM. Most likely she will not mention the economy or monetary policy.
The Federal Reserve’s self-imposed “blackout period” starts Saturday. This policy limits the extent to which Federal Open Market Committee participants and staff can speak publicly or grant interviews. This period begins two Saturdays preceding a Federal Open Market Committee meeting.
Currently there is a 98% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its November 7 policy meeting, and there is a 2% chance that the FOMC will reduce its key interest rate by 50 basis points.
The December 30-year U.S. Treasury bond futures will probably be the weakest performer in the interest rate market futures complex.
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