By Alan Bush | Senior Financial Economist at ADMIS
Stock index futures surged on news that Washington and Beijing agreed to a 90 day trade ceasefire during the G-20 summit in Argentina on Saturday and President Donald Trump said China has agreed to “reduce and remove” tariffs below the 40% level that the country is currently charging on vehicles made in the U.S.
However, the White House also said that the existing 10% tariffs on $200 billion worth of Chinese products would be increased to 25% if no agreement was reached within 90 days.
The 8:45 central time November Markit Manufacturing PMI is expected to be 55.4.
There are two 9:00 reports. The November Institute for Supply Management manufacturing index is anticipated to be 57.2 and the October construction spending report is estimated to show a .4% increase.
A less hawkish FOMC and now the apparent progress in the U.S.-China trade talks have long term bullish implications for stock index futures.
Flight to quality longs were liquidated in the U.S. dollar in light of the weekend news of a 90 day ceasefire in the U.S.-China trade war.
Also, a less hawkish Federal Reserve is likely to put a cap on the rally in the greenback.
The euro currency is a little higher on limited economic news.
The euro is stronger even though financial futures markets are pricing in just over a 70% chance of a rate hike from the European Central Bank by the end of 2019, which is down from almost 100% in early November.
The British pound is lower after a trade association said British manufacturers are heading into their slowest year of growth since 2015, as Brexit uncertainties reduce foreign demand and businesses prepare for potential shortages of raw materials.
The Australian dollar led the rally against the U.S. dollar after the Washington and Beijing deal for a ceasefire in their trade war, which encouraged investors to sell the greenback and buy riskier assets.
Flight to quality longs were liquidated after the U.S. and China declared a temporary trade truce.
Federal Reserve speakers today Federal Reserve member of the Board of Governors Lael Brainard at 9:30 and Dallas Federal Reserve Bank President Robert Kaplan at 12:00.
According to the financial futures markets, the probability of a fed funds rate hike at the Federal Open Market Committee’s December 19 policy meeting is 85%, which compares to 83% last week.
In light of Federal Reserve Chairman Powell’s dovish comments last week, it now appears that the FOMC will increase its fed funds rate one or possibly two times in 2019.
I expect the interest rate futures market will likely trend higher longer term, led by the thirty year Treasury bond futures.
December 18 S&P 500
Support 2791.00 Resistance 2817.00
December 18 U.S. Dollar Index
Support 96.540 Resistance 97.120
December 18 Euro Currency
Support 1.13240 Resistance 1.1403
December 18 Japanese Yen
Support .87830 Resistance .88370
December 18 Canadian Dollar
Support .75330 Resistance .76110
December 18 Australian Dollar
Support .7345 Resistance .7404
December 18 Thirty Year Treasury Bonds
Support 140^0 Resistance 140^24
December 18 Gold
Support 1219.0 Resistance 1237.0
December 18 Copper
Support 2.7900 Resistance 2.8550
January 19 Crude Oil
Support 51.95 Resistance 54.03
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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