Indices Higher with Rate Cut Expectations

STOCK INDEX FUTURES

Stock index futures are higher due to strong corporate earnings and growing expectations that the Federal Reserve will carry out interest rate cuts this year.

Federal Reserve Chair Jay Powell spoke on Sunday without comments on the economy or policy.

There are no major economic reports scheduled for today.

The fundamentals and technicals remain supportive.

CURRENCY FUTURES

The U.S. dollar index is higher.

The European Central Bank is likely to lower borrowing costs as soon as June, but there are uncertainties beyond that.

Prices of homes being listed for sale in the U.K. hit record highs, although the pace of gains has slowed.

INTEREST RATE MARKET FUTURES

Atlanta Federal Reserve Bank President Raphael Bostic said, “It is going to take a while before we are certain inflation is headed to 2.0%

Federal Reserve speakers today are Michael Barr at 8:00, Christopher Waller at 8:00, Philip Jefferson at 9:30 and Raphael Bostic at 7:00 PM.

Financial futures markets are predicting there is a 63% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its September 18 meeting.

The fundamentals and technicals have improved for futures, especially at the long end of the yield curve.

GOLD

Gold surged to a new record, driven by growing optimism that the Federal Reserve will soon cut interest rates and increased demand for safe-haven assets in light of the potential escalation of geopolitical tensions. Last week, economic reports showed signs of slowing U.S. consumer inflation and stalling retail sales, which gave the Fed more reason to pivot to accommodation. The precious metal also gained from increasing expectations that the Federal Reserve will move to lower interest rates earlier than was previously thought. Markets are anticipating the first rate reduction will occur in September. In addition, substantial buying of gold by central banks further supported the uptrend. Additional gains for gold are likely.

SILVER

Silver prices increased to the highest level since December 2012, pushing year-to-date gains to almost 33%. The advance in silver prices is closely tied to the upward trend in the gold market. Additionally, the appeal of silver as a safe-haven asset has been enhanced in light of the potential escalation of geopolitical tensions in the Middle East. Also, silver continues to benefit from its use in solar panels, which is expected to reach a record in 2024 and push the silver market into its fourth consecutive annual supply deficit. Higher prices for silver are likely.

COPPER

Copper prices advanced to record highs with July copper futures advancing to almost 5.20 due to strong demand expectations and a tight supply situation, which has recently intensified. Demand for the red metal has increased due to increasing expectations for copper consumption in light of copper’s key role in electrification from data-center infrastructure to grid-scale energy storage. Prospects of added mine supplies are limited. The main trend is higher for copper.

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