Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
STOCK INDEX FUTURES
Stock index futures are lower today, after yesterday the S&P 500 advanced to a six-week high.
Personal income in December increased 0.2% as expected, and personal consumption expenditures declined 0.2% when down 0.1% was anticipated.
The 9:00 central time January consumer sentiment index is estimated to be 64.6 and the 9:00 December pending home sales report is predicted to be down 1.0%.
The technical aspects are supportive on balance.
CURRENCY FUTURES
The U.S. dollar index is higher, although futures remain in a trading range.
Interest rate differentials are neutral for the U.S. dollar.
Loans to households in the euro area increased 3.8% year-on-year in December, slowing for a fourth consecutive month to mark the smallest gain since May of 2021. Credit to companies advanced 6.3%, which is much lower than 8.3% in November.
The Japanese yen is higher on news that the 4.3% increase in the Tokyo core consumer price index, which excludes fresh food but includes fuel, exceeded a median market forecast for a 4.2% gain and marked the fastest year-on-year increase since May 1981.
Traders are positioning for big monetary policy events next week, with the Federal Reserve decision due on Wednesday and both the Bank of England and the European Central Bank on Thursday. Both the BoE and the ECB are set to hike their key interest rates by 50 basis points.
INTEREST RATE MARKET FUTURES
According to financial futures markets, currently there is a 99.0% of probability that the Federal Open Market Committee will increase its fed funds rate by 25 basis points and a 1.0% probability of a 50 basis point hike at the February 1 policy meeting.
The long term outlook for futures is higher.
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