Indices Higher Ahead of Fed Chair Testimony

STOCK INDEX FUTURES

Stock index futures are higher in advance of Federal Reserve Chair Jerome Powell’s monetary policy testimony before the House Financial Services Committee at 9:00 central time.

Fed Chair Powell told lawmakers during a Senate hearing yesterday that higher interest rates could eventually tip the economy into a recession, saying it was “certainly a possibility.”

Jobless claims in the week ended June 18 were 229,000 when 225,000 were expected.

The 8:45 June PMI composite flash is anticipated to be 56.3 for manufacturing and 53.6 for the services index.

The June Kansas City Federal Reserve manufacturing index will be released at 10:00. In May the index was 23.

The rate of inflation remains the key driver to this market. A likely bottom could come when there are indications that the rate of inflation is slowing, which could influence the Federal Reserve to become less hawkish.

CURRENCY FUTURES

The U.S. dollar index is higher as interest rate differential expectations remain favorable to the greenback.

The euro currency declined on news that the S&P Global euro zone Manufacturing PMI dropped to 52 in June from 54.6 in May, which is the lowest in 22 months and below market expectations of 53.9.

The S&P/CIPS U.K. Manufacturing PMI fell to a 23-month low 53.4 in June from 54.6 in May, missing market expectations of 53.7.

The Confederation of British Industry’s distributive trades survey’s retail sales balance in the U.K. fell to -5 in June from -1 in May, which  is the third successive month volumes  failed to grow and below market expectations of -3.

INTEREST RATE MARKET FUTURES

Major government bond yields continued to decline as investors moved funds to safe-haven assets as fears grow that tightening monetary conditions will drag global economies into a recession.

There is a 90.9% probability that the Federal Open Market Committee will hike its fed funds rate by 75 basis points and a 9.1% probability that the rate will increase by 50 basis points at the July 27 meeting.

Copper, which is a metal with a history of predicting economic downturns, fell to below $3.85 per pound, which is the lowest since early 2021 due to increasing fears of a global economic slowdown.

Currently the Federal Reserve’s focus is clearly on inflation, while a slowing economy will be problem for the Fed to deal with later.

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