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US / EU Trade Relations Better

by AFS Archer Financial Svcs | Jul 26, 2018

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

Futures advanced yesterday afternoon on news that the U.S. and E.U. have agreed to avoid an all-out trade war and work to lower tariffs. President Donald Trump and European Commission chief Jean-Claude Juncker announced a "new phase" in U.S. - E.U relations after more than two hours of talks at the White House.  The two leaders in a joint statement said they agreed to "work together toward zero tariffs, zero non-tariff barriers and zero subsidies on non-automobile industrial goods."    

New orders for durable goods, which are products designed to last at least three years, increased 1.0% in June from the prior month. Economists had expected a 3.0% increase.   

Initial jobless claims increased 9,000 to 217,000 in the week ended July 21. Economists expected 215,000 new claims last week.   

The July Kansas City Federal Reserve manufacturing index will be released at 10:00 central time.  The June report came in at 28. 

U.S. stock index futures continue to be supported by the still relatively low global interest rate environment and the mostly stronger than estimated U.S. corporate earnings reports.

CURRENCY FUTURES

Yesterday the U.S. dollar weakened and the euro currency advanced on news that the U.S. and the E.U. have agreed to avoid an all-out trade war. 

The European Central Bank held its regularly scheduled policy meeting today. The European Central Bank’s Governing Council left interest rates unchanged and did not change its plans to begin scaling back its quantitative easing program in the fall.

In its policy statement, the ECB said it plans to phase out its €30 billion ($35 billion) a month bond buying program by December and switch its main focus to interest rates.  

INTEREST RATE MARKET FUTURES

Futures are lower as flight to quality longs are liquidated in light of a better tone to the trade situation between the U.S. and the E.U.

The Treasury will auction seven year notes today.

The probability of a fed funds rate hike at the Federal Open Market Committee’s September 26 meeting is 93%, which compares to 91% yesterday.

The second quarter U.S. gross domestic product report will be released tomorrow. The median estimate is for 4.2% growth. However, the Federal Reserve Bank of Atlanta is predicting second quarter gross domestic product will increase to 4.5%.

Although flight to quality buying is likely to come into the market from time to time, the longer term trend for futures is lower, especially for the thirty year Treasury bonds.

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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