Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
STOCK INDEX FUTURES
Stock index futures are mostly higher.
Housing starts in December were 1.460 when 1.425 million were expected on an annual rate, and building permits on an annual rate were 1.495 when 1.478 million were anticipated.
Jobless claims in the week ended January 13 were 187,000 when 206,000 were predicted.
The January Philadelphia Federal Reserve manufacturing index was -10.6 when -6.7 was forecast.
The fundamentals and technicals remain supportive to stock index futures longer term despite recent talk of a potentially less dovish Federal Reserve this year.
CURRENCY FUTURES
The U.S. dollar index is higher. The greenback recently advanced as interest rate differentials are becoming more supportive, and it looks like the U.S. dollar may have bottomed.
Construction output in the euro area declined 2.2% from the previous year in November of 2023, which is the sharpest drop since February of 2021, and accelerating from the 0.7% decline in October.
European Central Bank officials who until recently have been wary of discussing interest rate cuts now look increasingly open to beginning them in June.
Japan’s core machinery orders fell more than expected in November, declining 4.9% from the previous month. This compares to a 0.8% contraction expected by economists.
Traders are now looking ahead to domestic inflation data on Friday and the Bank of Japan’s policy decision on January 23.
Australian employment fell sharply in December after two months of surprisingly strong growth. The Australian Bureau of Statistics said net employment declined 65,100 in December from November. Market forecasts had been for an increase of 17,600.
Consumer inflation expectations in Australia were at 4.5% in January 2024, which is unchanged from December.
INTEREST RATE MARKET FUTURES
Raphael Bostic of the Federal Reserve today said inflation seems to be on a path to the Fed’s 2.0% target. Bostic will speak again at 11:05 central time.
Futures came under pressure when the mostly stronger than expected U.S. economic reports were released.
Financial futures markets are predicting there is a 3.0% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points and the January 31 policy meeting, and there is a 97.0% probability that the Fed will keep rates unchanged.
The chances of Fed rate cut in March are now only 55% after being 80% on Friday.
Interested in more futures markets? Explore our Market Dashboards here.
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.
