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Trade Issues With The European Union Heat Up - 4/9

by AFS Archer Financial Svcs | Apr 09, 2019

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

Stock index futures are lower after the Trump administration moved Monday toward imposing tariffs on approximately $11 billion in imports from the European Union. 

The March National Federation of Independent Business index was 101.8, which compares to expectations of 101.7. 

The 9:00 central time February Job Openings and Labor Turnover Survey, which tracks monthly changes in job openings and offers rates on hiring and quits, is anticipated to total 7.565 million.  For quite a few months, stretching back to last year, there are more jobs available than people out of work, which is unprecedented.

Corporate earnings season kicks off this week. So far, investors appear to be looking past the expected earnings declines due to a more accommodative Federal Reserve.   Analysts anticipate S&P 500 profits in the first quarter contracted 4.2% from a year ago, according to FactSet.   

My view is that the global 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 euro currency firmed, as investors even up positions before the European Central Bank policy meeting tomorrow. No change in key interest rates are expected, although the press conference afterwards will be closely monitored due to talk of tiered rates to ease pressure on banks.

The euro currency is higher in spite of news that the U.S. is considering imposing tariffs on hundreds of European goods from the European Union 

The British pound is a little higher as investors are closely watching, as U.K. Prime Minister  May is set to travel to Berlin to meet German Chancellor Merkel and French President Macron to discuss the prospect of a long Brexit delay.     

The Canadian dollar and the Australian dollar are higher, supported by the recent surge in crude oil prices to five month highs that lifted most commodity linked currencies.

Oil prices have recently advanced on expectations that global crude oil supplies will tighten due to fighting in Libya, OPEC led production cuts and U.S. sanctions against Iran and Venezuela.

INTEREST RATE MARKET FUTURES  

The Treasury will auction $38 billion of three year notes today, which is the first of three auctions scheduled for the week.

Federal Reserve speakers today are Federal Reserve Board of Governors Vice Chairman for Supervision Randal Quarles at 4:00 this afternoon and Federal Reserve Board of Governors Vice Chair Richard Clarida at 5:45.

Investors will be closely watching when the Fed publishes the minutes from its March policy meeting on Wednesday, which may provide additional clues about the central bank's expectations for growth and inflation. 

Financial futures are predicting there is a 49% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points or more at its December 11 policy meeting. Yesterday the probability was 50%.

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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