header_img

Traders Focusing More on Interest Rates and Less on U.S.-China Trade Talks

by Archer Financial Services | Jul 31, 2019

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

U.S. stock index futures advanced due to the very likely possibility that the Federal Open Market Committee will lower its fed funds rate at the conclusion of its policy meeting today. In addition, upbeat corporate earnings supported futures.

The U.S.-China trade talks concluded today without any major breakthrough and the Chinese commerce ministry said the two sides will meet again in the U.S. in September.

The July Automatic Data Processing employment change report showed an increase of 156,000 private sector jobs. Economists had forecast a gain of 155,000.

Compensation for U.S. workers increased more slowly in the second quarter. The employment-cost index, which is a measure of wages and benefits for civilian workers, increased 0.6% in the second quarter. The median estimate called for a gain of 0.7%. 

The 8:45 central time Chicago PMI is expected to be 50.5.

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.

CURRENCY FUTURES

After the U.S. dollar advanced to a two-month high yesterday, the greenback is a little lower today.

Economic growth in the euro area slowed in the second quarter. The latest data shows economic growth in the 19-nation region expanded 0.2% in the last quarter, which is down from 0.4% growth in the previous three months. 

The Canadian dollar advanced on news that Canadian economic output increased for a third straight month in May.  Canada's gross domestic product climbed 0.2% in May from the previous month. Market expectations were for a 0.1% gain. 

INTEREST RATE MARKET FUTURES

Today is the second day of the two-day Federal Open Market Committee meeting.

The Federal Open Market Committee will release a statement at 1:00 and Fed Chair Powell will hold a press conference at 1:30.

Financial futures markets are predicting there is almost a 100% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points, or more. A second and possibly a third rate cut is anticipated by financial futures markets before the end of this year.

A rate cut from the Federal Reserve today would be the first reduction since 2008.

In the longer term, higher prices are likely for futures, as most major central banks are likely to embark on a new round of easier credit policies.

SUPPORT AND RESISTANCE

September 19 S&P 500

Support    3001.00      Resistance    3031.00

September 19 U.S. Dollar Index

Support    97.610        Resistance    97.990

September 19 Euro Currency

Support    1.11700      Resistance    1.12170

September 19 Japanese Yen

Support    .92200        Resistance    .92600

September 19 Canadian Dollar

Support    .76000        Resistance    .76440

September 19 Australian Dollar

Support    .6866          Resistance    .6923

September 19 Thirty Year Treasury Bonds

Support    154^12       Resistance     155^10

August 19 Gold

Support    1423.0        Resistance     1442.0

September 19 Copper

Support    2.6650        Resistance     2.7000

September 19 Crude Oil

Support    57.87          Resistance     59.21

 



For more information about these markets, please contact Alan at 312.242.7911  or via email at alan.bush@admis.com. Thank you.

Would you like to open an account with us? Go to our interactive New Account application at Open an Account. It is fast, saves on postage and it’s green.

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.

Offers