By Alan Bush | Senior Financial Economist at ADMIS
Stock index futures are lower as political turmoil in Turkey spilled into global financial markets, driving the country’s currency to a 20% decline and to a record low.
The plunge in the Turkish lira heightened fears that Turkey’s problems could affect Asian and European banks that have invested in the region.
The U.S. consumer price index in July increased 0.2% from a month earlier, as expected, and core prices, which excludes the food and energy components, rose 0.2%, which is also as expected.
Since the March 2009 lows were made, there have been a multitude of geopolitical problems that temporarily adversely affected stock index futures, and every time stock index futures were able to recover. I believe the latest geopolitical issue, the problems in Turkey will only negatively affect stock index futures for a short time.
The U.S. dollar is higher and most other currencies are lower due to the plunge in the Turkish lira.
The euro currency declined to its lowest levels in over a year after the European Central Bank indicated it has concerns about the exposure of banks in the euro zone to a dramatic decline in the Turkish lira.
The U.K gross domestic product in the three months through June increased .4%, as expected.
There is some flight to quality buying coming into the Japanese yen. In addition, there was support for the yen on news that Japan's economy expanded by a faster than expected annualized pace of 1.9%.
The Canadian dollar is lower in spite of news that the Canadian economy added 54,100 jobs in July. Market expectations were for a gain of 17,000 jobs.
Canada's jobless rate was 5.8% in July, which is down from 6% in the previous month. Market expectations were for an unemployment rate of 5.9%.
The deteriorating situation in Turkey is causing flight to quality buying to come into the credit futures markets.
The probability of a fed funds rate hike at the Federal Open Market Committee’s September 26 meeting is 96%, which is unchanged from yesterday.
Also, there are increasing probabilities of an additional rate hike in December.
In spite of mostly higher prices today due to flight to quality buying, the longer term trend for futures is lower, especially for the thirty year Treasury bonds.
September 18 S&P 500
Support 2830.00 Resistance 2855.00
September 18 U.S. Dollar Index
Support 95.310 Resistance 96.230
September 18 Euro Currency
Support 1.14350 Resistance 1.15710
September 18 Japanese Yen
Support .90100 Resistance .90650
September 18 Canadian Dollar
Support .76150 Resistance .76800
September 18 Australian Dollar
Support .7270 Resistance .7385
September 18 Thirty Year Treasury Bonds
Support 143^8 Resistance 144^8
December 18 Gold
Support 1211.0 Resistance 1225.0
September 18 Copper
Support 2.7300 Resistance 2.7800
September 18 Crude Oil
Support 66.03 Resistance 67.71
For more information about these markets, please contact Alan at 312.242.7911 or via email at firstname.lastname@example.org. 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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