By Alan Bush | Senior Financial Economist at ADMIS
Futures are mixed, being supported by stronger than expected second quarter corporate earnings reports and a bullish Automatic Data Processing employment change report, but fears of an escalating tariff war between the U.S. and China limited gains.
The Shanghai Composite Index dropped 1.8% after several White House advisers urged President Donald Trump to sharply increase tariffs that were proposed on some Chinese imports.
The July Automatic Data Processing national employment report showed an increase of 219,000, which compares to the expected rise of 185,000. This number comes ahead of Friday’s release of the U.S. nonfarm payrolls report, which is predicted to come in at up 190,000.
The 8:45 central time July PMI is expected to be 55.5 and the 10:00 July ISM manufacturing index is anticipated to be 59.5.
Also at 10:00 is the June construction spending report, which is estimated to be up .3%.
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.
The U.S. dollar is a little higher and the euro currency is a little lower as traders even up ahead of the FOMC statement later today.
In recent weeks interest rate differential expectations have turned slightly less favorable to the U.S. dollar and slightly more favorable to the euro.
The British pound is higher in spite of news that U.K. manufacturing growth slowed more than expected in July. A purchasing managers’ index for the industry fell to a three month low of 54 in July from 54.3 in June.
The Japanese yen declined for a second day after the Bank of Japan at its policy meeting yesterday promised to keep interest rates low. The BoJ pledged to maintain its short term interest rate target at minus .1% and decided to guide its 10 year debt yields to close to zero percent.
Some market observers believe Japan's reluctance to change its policy aggressively is a result of its desire to keep its currency competitive.
The Canadian dollar and the Australian dollar are lower due to weaker crude oil prices.
The thirty year Treasury bond futures fell to a new 10 week low today as a result of the stronger than expected July Automatic Data Processing national employment report.
In addition, some of the pressure on futures was linked to a report that the U.S. Treasury Department will increase the issuance of government debt at Treasury auctions by a total of $30 billion over the next three months.
The Federal Open Market Committee concludes its two day meeting today and a statement will be released at 1:00. There will not be a press conference after the statement. The FOMC is expected to keep interest rates unchanged and reaffirm its outlook for additional rate hikes.
The market has almost fully priced in a September increase and may hike rates again before the end of the year. The probability of a fed funds rate increase at the Federal Open Market Committee’s September 26 meeting is 91%, which is unchanged from yesterday.
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.
September 18 S&P 500
Support 2808.00 Resistance 2829.00
September 18 U.S. Dollar Index
Support 94.200 Resistance 94.550
September 18 Euro Currency
Support 1.17030 Resistance 1.17490
September 18 Japanese Yen
Support .89340 Resistance .89900
September 18 Canadian Dollar
Support .76670 Resistance .77110
September 18 Australian Dollar
Support .7402 Resistance .7444
September 18 Thirty Year Treasury Bonds
Support 141^24 Resistance 143^12
December 18 Gold
Support 1224.0 Resistance 1237.0
September 18 Copper
Support 2.7500 Resistance 2.8300
September 18 Crude Oil
Support 67.33 Resistance 68.77
For more information about these markets, please contact Alan at 312.242.7911 or via email at email@example.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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