Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher on the belief that this morning’s on-balance softer than expected employment numbers could cause the Federal Open Market Committee to pivot to accommodation sooner rather than later.
Nonfarm payrolls in June increased 206,000 when a gain of 189,000 was expected. However, the previous month was revised to show a substantially smaller increase.
Private payrolls increased 136,000, which compares to the anticipated increase of 160,000.
Manufacturing payrolls declined 8,000 when an increase of 6,000 was estimated.
The unemployment rate was 4.1% when 4.0% was forecast.
Average hourly earnings increased 0.3%, which was expected, and average weekly hours were 34.3 as anticipated.
The longer term fundamentals remain supportive to stock index futures.
INTEREST RATE MARKET FUTURES
Futures quickly advanced due to the weaker on-balance U.S. employment numbers.
Financial futures markets are predicting there is a 76% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its September 18 meeting. On Wednesday the probability was 68%.
Financial futures markets are suggesting there will be two 25 basis point rate cuts in 2024, despite many Federal Reserve officials predicting only one fed funds rate reduction this year.
CURRENCY FUTURES
The U.S. dollar index was lower in the overnight trade and declined further when the 7:30 central time U.S. employment numbers were reported.
German industrial production declined by 2.5% month-over-month in May, missing market expectations of 0.2% growth.
Retail sales in the euro area increased 0.1% month-over-month in May, which compares to forecasts of a 0.2% gain.
The British pound advanced to an over three-week high in light of results of the parliamentary elections.
Financial futures markets are now predicting there is approximately a 60% probability that the Bank of England will lower its key interest rate in August. Some analysts are anticipating a total of three interest rate cuts from the BOE in 2024.
The Japanese yen rebounded slightly from 38-year lows that were registered earlier this week. Interest rate differentials between the U.S. and Japan remain wide.
Canada’s services economy moved into contraction in June. The S&P Global Canada services PMI headline business activity index fell to 47.1 from 51.1 in May.
Interested in more futures markets? Explore our Market Dashboards here.
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.
