Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
STOCK INDEX FUTURES
U.S. stock index futures fell as bond yields resumed their climb.
The third estimate of the second quarter gross domestic product was down 0.6% as expected.
In addition, there are worries of a global economic downturn from aggressive interest rate hikes from central banks and risks of a potential contagion from a turmoil in U.K. financial markets.
Jobless claims in the week ended September 24 were 193,000 when 218,000 were anticipated.
CURRENCY FUTURES
The U.S. dollar index advanced to a new 20-year high yesterday.
Interest rate differential expectations remain bullish for the greenback long term.
The euro currency is lower on news that the economic sentiment indicator in the euro area fell 3.6 points from a month earlier to 93.7 in September 2022, which is the lowest level since November 2020 and below market expectations of 95.0.
Annual inflation in Germany, as measured by the consumer price index climbed to 10.0% in September from 7.9% in August. This compares to the market expectation of 9.4%.
The Australian Bureau of Statistics reported its monthly indicator of consumer prices rose 6.8% in August from a year earlier. That was down from 7.0% in July.
INTEREST RATE MARKET FUTURES
The bond-buying plan in the U.K. announced yesterday sparked a rebound in the interest rate market futures yesterday. However, some of those gains are being given back today.
Some economists have begun to advocate for accepting a higher inflation target somewhere in the 3.0% or 4.0% range in order to avoid a severe downturn in the economy.
Federal Reserve Bank of Atlanta President Raphael Bostic yesterday said he backs raising rates by a further 1.25 percentage points to 4.25%-4.50% by year end.
Federal Reserve speakers today are Loretta Mester at 12:00 and Mary Daly at 3:45.
According to financial futures markets, there is a 38.8% probability that the Federal Open Market Committee will hike its fed funds rate by 50 basis points and a 61.2% probability that the rate will increase by 75 basis points at the November 2 policy meeting.
The inverted Treasury yield curve continues to warn of economic risks ahead.
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.
© 2024 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.
