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U.S.-China Trade Talks Apparently Went Well

by Archer Financial Services | Jan 09, 2019

By Alan Bush | Senior Financial Economist at ADMIS   
 

STOCK INDEX FUTURES

Stock index futures advanced due to apparent progress in the U.S.-China trade talks. The latest round of trade discussions between Washington and Beijing have concluded.

U.S. Under Secretary of Agriculture for Trade and Foreign Agricultural Affairs Ted McKinney today said he thought negotiations “went just fine.”

There are reports that the U.S. will release a "message" tomorrow concerning the trade talks.

China's Foreign Ministry hinted that the talks were a success and it would soon release a statement on the outcome.

Separately, auto sales in China, the world's largest vehicle market, saw their first annual decline in twenty years. Sales fell 6% to 22.7 million units in 2018, according to the China Passenger Car Association.

The minutes of the December 19 Federal Open Market Committee meeting will be released at 1:00 central time.

It may take a while, but downward pressure on interest rates globally, but not from the Fed in the short term, will ultimately rescue this market.

 

CURRENCY FUTURES

The euro currency is higher in spite of disappointing trade data out of Germany and a decline in consumer confidence in France.

The European Central Bank will not be able to hike its key interest rates until mid-2020, which is well past the timing suggested by the bank’s policy guidance.

The Canadian dollar and the Australian dollar were boosted by sharply higher crude oil prices and hopes for progress in the U.S.-China trade talks.

The Australian dollar is considered to be a barometer of sentiment towards China.

 

INTEREST RATE MARKET FUTURES

A better tone to the U.S.-China trade talks caused flight to quality long liquidation.

Today, Federal Reserve Bank of St. Louis President James Bullard said he’s concerned that any more interest rate increases could push the U.S. economy into a recession and Federal Reserve Bank of Atlanta President Raphael Bostic said it's time for Fed to be patient with monetary policy.

Boston Federal Reserve Bank President Eric Rosengren will speak at 10:30.

The Treasury will auction ten year notes today.

Financial futures markets are predicting a 68% probability of the fed funds rate remaining unchanged at the current level of 2.25%-2.50% this year.

There is a 24% chance of an increase the fed funds rate by 25 basis points and there is an 8% probability of a rate cut.

The increasing chance of a rate hike is primarily due to the recently increased optimism that the U.S. and China can reach a trade agreement.

Longer term, I expect the interest rate futures market will likely trend higher, led by the thirty year Treasury bond futures.

The long term trend for gold and silver is higher.

 

SUPPORT AND RESISTANCE

March 19 S&P 500

Support    2566.00      Resistance    2595.00

 

March 19 U.S. Dollar Index

Support    95.110        Resistance    95.590

 

March 19 Euro Currency

Support    1.14980      Resistance    1.15550

 

March 19 Japanese Yen

Support    .92140        Resistance    .92660

 

March 19 Canadian Dollar

Support    .75360        Resistance    .75830

 

March 19 Australian Dollar

Support    .7137          Resistance    .7188

 

March 19 Thirty Year Treasury Bonds

Support    145^10       Resistance    146^8

 

February 19 Gold

Support    1278.0        Resistance    1295.0

 

March 19 Copper

Support    2.6450        Resistance    2.6900

 

February 19 Crude Oil

Support    49.60          Resistance    51.75


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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