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U.S.-China Trade Optimism Dominates Financial Markets

by Archer Financial Services | Apr 03, 2019

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

Global stock index futures climbed on renewed hopes that the U.S. and China are close to a trade deal.

U.S. equity futures are higher for a fifth day and S&P 500 futures are now approximately up 14.5% on the year.

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are scheduled to meet with Chinese Vice Premier Liu He later today to resume talks.

The Automatic Data Processing national employment report for March showed a gain of 129,000 jobs, which is a major downside miss. The payrolls number was forecast to be up 165,000.

This report is a precursor to the more important employment report from the Labor Department that will be released on Friday. The non-farm payrolls number in that report is predicted to be up 175,000 in March and the unemployment rate is expected to remain at 3.8%.

The ADP report showed the weakest job gains since September 2017.

The 8:45 central time March PMI services index is expected to be 54.8 and the 9:00 Institute for Supply Management non-manufacturing index is anticipated to be 58.

My view is that the reflation story remains on track and easier credit conditions from most of the world’s central banks are coming and will be the dominant fundamental that supports stock index futures in the long term.

 

CURRENCY FUTURES

The U.S. dollar is lower due to signs that progress is being made toward a U.S.-China trade deal, which sparked increased appetite for assets that are perceived to be more speculative.

The euro currency is higher in spite of news of a deepening downturn in the euro zone's manufacturing sector.

A composite purchasing managers index slipped to a revised reading of 51.6 in March from 51.9 in February.  

In the longer term view, interest rate differential expectations offer no clear advantage to either the U.S. dollar or the euro currency, since the Federal Reserve and the European Central Bank are both likely to move toward accommodation this year.

There are reports that U.K. Prime Minister Theresa May will ask for a second Brexit extension.

The Japanese yen is lower as flight to quality vehicles are liquidated.

The Australian dollar is higher, recovering most of the losses it suffered yesterday after the Reserve Bank of Australia’s policy meeting, due to improved optimism about the U.S.-China.

 

INTEREST RATE MARKET FUTURES

Flight to quality longs are being liquidated in light of upbeat talk on U.S.-China trade.  

Minneapolis Federal Reserve Bank President Neel Kashkari will speak at 4:00 this afternoon.

Financial futures are predicting there is a 59% probability that Federal Open Market Committee will lower its fed funds rate by 25 basis points or more at its December 11 policy meeting.

Follow-through weakness for futures is likely today.

 

SUPPORT AND RESISTANCE

June 19 S&P 500

Support    2860.00      Resistance    2893.00

 

June 19 U.S. Dollar Index

Support    96.410        Resistance    96.930

 

June 19 Euro Currency

Support    1.12670      Resistance    1.13380

 

June 19 Japanese Yen

Support    .90020        Resistance    .90550

 

June 19 Canadian Dollar

Support    .74970        Resistance    .75430

 

June 19 Australian Dollar

Support    .7058          Resistance    .7148

 

June 19 Thirty Year Treasury Bonds

Support    147^2         Resistance     148^20

 

June 19 Gold

Support    1290.0        Resistance    1302.0

 

May 19 Copper

Support    2.9000        Resistance    2.9550

 

May 19 Crude Oil

Support    62.27          Resistance    63.13


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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