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Trade Worries, But Stock Index Futures Well Off of Lows

by Archer Financial Services | Jul 11, 2018

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

Increased global trade tensions were not on the back burner for very long. Stock index futures are lower today, although well off the lows, after U.S. Trade Representative Robert Lighthizer said the U.S. would impose tariffs of 10% on additional Chinese imports worth $200 billion.

The news of more possible tariffs came shortly after Washington imposed 25% tariffs on $34 billion of Chinese imports. Beijing responded immediately with matching tariffs on the same amount of U.S. exports to China.  

U.S. producer prices increased at the fastest rate since 2011. The producer price index increased a seasonally adjusted .3% in June from a month earlier, when up .2% was expected and the producer price index,  excluding the food and energy categories, were also up .3% in June from the previous month, which compares to the anticipated gain of .2%.

The July Atlanta Fed's business inflation expectations survey will be released at 9:00 central time. Last month’s figure was 2.1%.

The 9:00 May wholesale trade report is estimated to show an increase of .5%.

In spite of today’s pressure, U.S. stock index futures are holding up relatively well in spite of the ongoing global trade uncertainties. It was just yesterday that S&P500 futures advanced to 17 week highs.

 

CURRENCY FUTURES

The U.S. dollar is underperforming in light of the bullish U.S. producer price index report and the likely hike in the fed funds rate in September.

The euro currency is firmer on reports that the European Central Bank could increase its key interest rate in July 2019. Previously the consensus view was that the ECB could hike rates in the fall of next year.  

Interest rate differential expectations continue to turn a little more supportive to the euro and less favorable to the U.S. dollar.   

With China and Australia being major trading partners, the Australian dollar fell after the Trump administration threatened 10% tariffs on $200 billion worth of Chinese imports in an escalating trade conflict.

 

INTEREST RATE MARKET FUTURES

Futures are higher in light of the escalating trade conflict. However, gains were limited by the bearish U.S. producer price index report.

The Treasury will auction ten year notes today.

New York Federal Reserve Bank President John Williams will speak at 3:30.

The probability of a fed funds rate hike at the Federal Open Market Committee’s September 26 meeting is 87%, which is unchanged from yesterday.

Although flight to quality buying is likely to come in from time to time, the longer term trend for futures is lower.

 

SUPPORT AND RESISTANCE

September 18   S&P 500

Support    2763.00       Resistance    2792.00

 

September 18   U.S. Dollar Index

Support    93.730         Resistance    94.290

 

September 18   Euro Currency

Support    1.17440       Resistance    1.18280

 

September 18   Japanese Yen

Support    .90160         Resistance    .90730

 

September 18   Canadian Dollar

Support    .75890         Resistance    .76340

 

September 18   Australian Dollar

Support    .7372           Resistance    .7443

 

September 18   Thirty Year Treasury Bonds

Support    145^0          Resistance    145^26

 

August 18   Gold

Support    1246.0         Resistance    1261.0

 

September 18   Copper

Support    2.7000         Resistance    2.8400

 

August 18   Crude Oil

Support    73.01           Resistance    74.73


For more information about these markets, please contact Alan at 312.242.7911  or via email at alan.bush@admis.com. Thank you.

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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 risk of loss in trading futures and options can be substantial. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff.  Research analyst does not currently maintain positions in the commodities specified within this report. 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.

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