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Trade Tensions Heat Up

by Archer Financial Services | Aug 02, 2018

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

Futures are lower due to fears of an escalating trade dispute between the U.S. and China. White House officials said President Donald Trump was proposing a 25% tariff on $200 billion worth of Chinese imports.

While U.S. equity markets are down today, they are holding up better than the Shanghai Composite Index, which dropped over 2.0%. 

Initial jobless claims increased to a seasonally adjusted 218,000 in the week ended July 28 from 217,000 in the prior week. Economists had forecast 220,000 new applications for jobless benefits last week. 

The 9:00 central time June factory orders report is expected to show a .9% increase.

 

CURRENCY FUTURES

The U.S. dollar is higher, the euro currency is lower and the Chinese yuan dropped to a 14 month low as a result of the escalating trade dispute between the U.S. and China.

The British pound is lower in spite of bullish news.

The Bank of England hiked its key lending rate to the highest level since 2009. BoE officials voted unanimously to raise the central bank’s policy rate to 75 basis points from 50 basis points, but indicated it was in no hurry to raise them further.

The BoE’s nine policymakers were unexpectedly unanimous in their vote to raise when economists had mostly anticipated a 7-2 vote in favor of hiking rates.

The pound is lower in spite of news that U.K. construction growth unexpectedly jumped to the highest level in a year.

The Canadian dollar and the Australian dollar are lower due to weaker crude oil prices.

 

INTEREST RATE MARKET FUTURES

The Federal Open Market Committee, in a statement released after its two-day policy meeting yesterday voted 8 to 0 to keep the fed funds rate unchanged at a range of between 1.75% and 2.00%, as expected.

The FOMC presented an upbeat assessment of the economy's performance, suggesting another interest rate increase is likely at its next meeting in late September.

The Fed said job gains, household spending and business investment have grown strongly.

The statement was about as expected, and there was limited market impact on financial markets.

There was some flight to quality buying today in light of the escalating trade tensions between the U.S. and China.

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 hike 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.

 

SUPPORT AND RESISTANCE

September 18   S&P 500

Support    2788.00      Resistance    2817.00

 

September 18   U.S. Dollar Index

Support    94.350        Resistance    94.970

 

September 18   Euro Currency

Support    1.16310      Resistance    1.17110

 

September 18   Japanese Yen

Support    .89660        Resistance    .90110

 

September 18   Canadian Dollar

Support    .76670        Resistance    .77120

 

September 18   Australian Dollar

Support    .7350          Resistance    .7421

 

September 18   Thirty Year Treasury Bonds

Support    141^0         Resistance    142^26

 

December 18   Gold

Support    1219.0        Resistance    1233.0

 

September 18   Copper

Support    2.7000        Resistance    2.7650

 

September 18   Crude Oil

Support    66.82          Resistance    68.55


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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