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U.S. - Mexico Accord Boosts Stock Index Futures

by Archer Financial Services | Jun 10, 2019

By Alan Bush | Senior Financial Economist at ADMIS   
   

STOCK INDEX FUTURES

U.S. stock index futures are higher for a fifth day after the U.S. and Mexico reached a deal to avoid tariffs. President Donald Trump announced Sunday that proposed tariffs on Mexican imports would be suspended indefinitely.     

However, in the meanwhile, trade tensions between the U.S. and China continue to drag on.

The Labor Department's April JOLTS report, which tracks monthly changes in job openings and offers rates on hiring and quits, will be reported  at 9:00 central time. The median estimate is 7.4 million.

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

But, first we need to get past the U.S.-China trade hurdles.
 

CURRENCY FUTURES

The U.S. dollar is higher due to news of the U.S.-Mexico deal.

The euro currency pulled back from 2-1/2 month highs when it was reported that sources said European Central Bank policymakers were open to lowering the ECB's policy rate if economic growth slowed.

The flight to quality currencies, the Japanese yen and the Swiss franc, declined in light of the U.S.- Mexico trade agreement. 

The British pound is lower on news that the U.K. economy shrank 0.4% in April compared with March, which was the largest monthly decline since March 2016.  

The Canadian dollar is higher in spite of news that Canadian housing starts fell in May compared with the previous month.  Housing starts were 202,337 units in May when economists had expected starts to be 205,000.
 

INTEREST RATE MARKET FUTURES

Flight to quality longs were liquidated following news of the U.S.-Mexico accord.

Traders continue to believe the Federal Reserve will be forced to cut interest rates to boost economic growth.

Financial futures markets are predicting there is an 84% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points or more at its July 31 policy meeting. Late last week the probability was 74%. Another rate cut is likely in December. 

All of the flight to quality vehicles are lower today as a result of news of the U.S.-Mexico agreement.

However, with one trade rift apparently resolved, the U.S.-China trade dispute appears to be far from a resolution. Now is a good time to establish longs or add to longs in the flight to quality vehicles, especially the thirty year Treasury bond futures, but also the Japanese yen, the Swiss franc and gold.


SUPPORT AND RESISTANCE

June 19 S&P 500

Support    2877.00      Resistance    2903.00

June 19 U.S. Dollar Index

Support    96.500        Resistance    96.950

June 19 Euro Currency

Support    1.12880      Resistance    1.13440

June 19 Japanese Yen

Support    .92000        Resistance    .92440

June 19 Canadian Dollar

Support    .75280        Resistance    .75550

June 19 Australian Dollar

Support    .6957          Resistance    .7010

September 19 Thirty Year Treasury Bonds

Support    153^12       Resistance     154^12

August 19 Gold

Support    1327.0        Resistance     1344.0

July 19 Copper

Support    2.6250        Resistance     2.6500

July 19 Crude Oil

Support    53.73          Resistance     54.98


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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