Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher despite yesterday’s release of the hawkish on balance minutes from the July 26 Federal Open Market Committee meeting.
Jobless claims in the week ended August 12 were 239,000 when 240,000 were expected.
The August Philadelphia Federal Reserve manufacturing index was 12 when negative 10 was anticipated.
The 9:00 central time July leading indicators is predicted to be down 0.4%.
Futures are overperforming the news, which suggests there may be follow-through gains today.
CURRENCY FUTURES
The U.S. dollar index is lower and is underperforming the news.
Bankruptcy declarations in the European Union in the second quarter of this year hit the highest level since 2015. The number of bankrupt companies in the April-June period was 8.0% higher than in the previous quarter, marking a sixth straight increase.
Japan’s exports fell in July for the first time in 29 months, according to data from the Ministry of Finance. Exports fell 0.3% from a year earlier when economists expected exports would fall by 1.0%.
Australia’s seasonally adjusted unemployment rate increased to 3.7% in July from 3.5% in the previous month, which was above market expectations of 3.6% and is the highest level since April. The number of unemployed people increased by 35,600 to 541,000.
INTEREST RATE MARKET FUTURES
The newest fundamental in recent days is some Federal Reserve officials are once again talking about the need for an additional fed funds rate hike.
Government bond yields around the world worked higher as investors anticipate interest rates will remain elevated due to persistent high inflation. Yesterday’s release of the minutes of the Federal Open Market Committee’s July 26 meeting showed officials continued to see significant upside risks to inflation, which could require additional tightening of monetary policy.
Despite the recently more hawkish Federal Reserve, most market participants see the Federal Reserve leaving its fed funds rate unchanged when it meets next month.
Financial futures markets are predicting there is an 86% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at its September 20 policy meeting, and there is a 14% probability of a 25 basis point increase.
While Federal Reserve officials close in on the end of their tightening campaign, the debate is shifting from how high interest rates need to go to how long they should remain at elevated levels.
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