Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
Geopolitics Concern Dominate Financials
- November 28, 2022
- Alan Bush
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STOCK INDEX FUTURES
Stock index futures are lower due to geopolitical risks.
The 9:30 central time November Dallas Federal Reserve manufacturing index is expected to be negative 20.5.
Despite lower prices today, the fundamentals and technicals for stock index futures are improving.
CURRENCY FUTURES
Flight to quality buying supported the U.S. dollar index in the overnight trade. However, prices have turned lower.
In the last two months interest rate differential expectations have turned against the greenback.
Lower prices are likely for the U.S. dollar.
The Confederation of British Industry’s distributive trades survey’s retail sales balance in the U.K. fell 37 points to -19 in November 2022, pointing to a sharp decline in sales.
The Swiss franc is higher and remains near three-month highs as hawkish signs from the Swiss National Bank remain. SNB Chairman Jordan said there is a high probability that the central bank will further tighten policies at the bank’s next decision, as current interest rates are low given the elevated inflation expectations.
Flight to quality buying is supporting the Japanese yen.
Australian retail sales fell for the first time this year in October. Retail sales fell 0.2% in October from the prior month, which compares to expectations for growth of 0.5%.
INTEREST RATE MARKET FUTURES
Flight to quality buying is supporting futures.
John Williams of the Federal Reserve will speak at 11:00.
A majority of Federal Reserve policymakers have been hinting that soon it will be appropriate to slow the pace of interest rate hikes. Earlier this month, the Fed delivered its fourth straight 75 basis point rate hike and pushed borrowing costs to the highest since 2008.
According to financial futures markets currently, there is a 70.0% probability that the Federal Open Market Committee will increase its fed funds rate by 50 basis points at the December 14 meeting and a 30.0% probability that the rate will be hiked by 75 basis points.
The fundamental and technical aspects have turned more supportive.
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