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U.S.-China Trade Talks to Resume this Month?

by Archer Financial Services | Jan 11, 2019

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

U.S. consumer price growth in December was the slowest since August 2017.

The U.S. consumer price index declined 0.1% in December, after November’s unchanged reading. The data was in line with consensus estimates. For the year, headline inflation increased 1.9%.

Monthly core inflation, which takes out the volatile food and energy components, rose 0.2%, following a 0.2% increase in November. Economists were expecting to see a 0.2% gain.

U.S. officials expect China’s top trade negotiator may visit Washington this month, suggesting higher level discussions are likely to follow this week’s talks with mid-level officials in Beijing.

Large U.S. banks will kick off fourth quarter earnings next week.  S&P 500 companies on average are expected to post 14.5% growth in earnings per share, according to IBES data from Refinitiv.

However, expectations for growth in 2019 are at 6.4%, which is down from an expectation of 7.3% growth on January 1.

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 U.S. dollar is lower as interest rate differential expectations are turning against the U.S. dollar.

The euro currency is higher and is headed for its biggest weekly gain in over four months, with the U.S. dollar weakening on cautious signals from the Federal Reserve about additional interest rate hikes.

The British pound is higher after a report that Brexit could be delayed beyond the March deadline before paring gains when the government ruled out an extension.

 

INTEREST RATE MARKET FUTURES

Prices are higher in light of lower prices for stock index futures.

Yesterday, at the Economic Club of Washington, Federal Reserve Chairman Jerome Powell reiterated the U.S. central bank will be patient about increasing interest rates.

Financial futures markets are predicting a 69% probability of the fed funds rate remaining unchanged at the current level of 2.25%-2.50% this year.

There is a 19% chance of an increase in the fed funds rate by 25 basis points and there is a 12% probability of a 25 basis point rate cut this year.

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

Gold and silver daily charts are forming a symmetrical triangle pattern. The rule of thumb is that prices break out of a congestion pattern in the same direction that they came into the pattern approximately 65% on the time.

The long term trend for gold and silver is higher.

 

SUPPORT AND RESISTANCE

March 19 S&P 500

Support    2575.00      Resistance    2602.00

 

March 19 U.S. Dollar Index

Support    94.670        Resistance    95.190

 

March 19 Euro Currency

Support    1.15330      Resistance    1.16160

 

March 19 Japanese Yen

Support    .92590        Resistance    .93030

 

March 19 Canadian Dollar

Support    .75450        Resistance    .76050

 

March 19 Australian Dollar

Support    .7181          Resistance    .7249

 

March 19 Thirty Year Treasury Bonds

Support    145^0         Resistance    146^0

 

February 19 Gold

Support    1285.0        Resistance    1297.0

 

March 19 Copper

Support    2.6300        Resistance    2.6800

 

February 19 Crude Oil

Support    51.63          Resistance    53.55


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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