Written Commentary
The Ghost in the Machine Q4 2023
November 28, 2023
STOCK INDEX FUTURES
Stock index futures declined when the larger than expected consumer price index was released. The May consumer price index increased 1.0% when up 0.7% was expected and the consumer price index, excluding food and energy, was up 0.6% when a gain of 0.5% was anticipated.
Traders are watching economic data closely for clues about the Federal Reserve’s path for raising interest rates.
The 9:00 central time June consumer sentiment index is predicted to be 58.5%.
CURRENCY FUTURES
The U.S. dollar was higher in the overnight trade and gains were extended when the U.S. consumer price index was released.
The European Central Bank held its policy meeting yesterday and committed to a quarter-point increase in interest rates next month and opened the door to a larger hike in the fall as it confronts record inflation.
The yen advanced after Japanese policymakers made rare comments about its weakness.
INTEREST RATE MARKET FUTURES
Federal Reserve officials have indicated they plan to raise interest rates by half a percentage point at next week’s policy meeting, and by the same amount again in July.
Financial futures markets are predicting there is a 91.4% probability that the Federal Open Market Committee will hike its fed funds rate by 50 basis points and an 8.6% probability that the rate will increase by 75 basis points at the June 15 policy meeting.
The International Monetary Fund expects to further reduce its forecast for global economic growth in 2022 next month, according to an IMF spokesperson today, following moves by the World Bank and Organization for Economic Co-operation and Development to cut their own economic forecasts this week.
That would be the IMF’s third downgrade this year. In April, the IMF cut its forecast for global economic growth by almost a full percentage point to 3.6% in 2022 and 2023.
The World Bank on Tuesday cut its global growth forecast by almost a third to 2.9% for 2022.
A day later, the OECD cut its forecast by 1.5 percentage points to 3.0%.
The 30-year Treasury bond futures broke out above a two-week downtrend line before giving back the gains.
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