Written Commentary
STOCK INDEX FUTURES
Stock index futures are lower due to disappointing earnings results in the technology sector.
Mortgage applications in the week ended October 21 were down 1.7%, as U.S. mortgage rates surpassed 7.0% to the highest reading since 2001.
Wholesale inventories in September were up 0.8% when an increase of 1.1% was expected.
The 9:00 central time September new home sales report is anticipated to be 585,000.
Yesterday futures advanced to the highest level since September 22.
CURRENCY FUTURES
The U.S. dollar index is lower taking out the October 4 low and has underperformed the news in recent weeks due to increasing prospects that the Federal Reserve will have to slow the pace of interest rate hikes to avoid overtightening.
The euro currency strengthened past parity with the U.S dollar on Wednesday, trading at the highest level in six weeks. The European Central Bank is expected to deliver a second consecutive 75 basis point hike rate hike tomorrow.
In a recent survey a majority of economists said they expect the Bank of England to hike its key interest rate by 75 basis points at the next policy meeting on November 3. There is a minority view that the BoE will increase its main rate by a larger amount.
The Bank of Canada is likely to deliver a fifth interest rate hike today. Markets are pricing in a 75 basis point increase in the central bank’s overnight rate bringing the benchmark to 4.0%.
The Bank of Japan will hold its policy meeting on October 28. Interest rate policies are likely to remain unchanged.
The annual inflation rate in Australia climbed to 7.3% in the third quarter of 2022 from 6.1% in the second quarter, which is above market forecasts of 7.0%. This was the highest level since the second quarter of 1990.
INTEREST RATE MARKET FUTURES
There are no major Federal Reserve speakers scheduled for today.
The central bank imposes a quiet period starting the second Saturday before a Federal Open Market Committee meeting during which officials refrain from commenting on the economy and monetary policy. The Fed refers to this as a “Blackout Period.”
The Treasury will auction five-year notes.
According to financial futures markets currently, there is a 96.0% probability that the Federal Open Market Committee will increase its fed funds rate by 75 basis points at the November 2 policy meeting and a 4.0% probability that the rate will be hiked by 50 basis points.
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