Stock Index Futures Recover

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

U.S. stock index futures were sharply lower in the overnight trade after the U.S. Treasury unexpectedly named China a currency manipulator. This is viewed as an escalation of the trade war.

However, stock index futures rebounded and are now higher after the People’s Bank of China issued a statement claiming that it is not a currency manipulator and told foreign companies that the yuan will not keep falling.

At 9:00 central time the Labor Department will release its Job Openings and Labor Turnover Survey (JOLTS), which tracks monthly changes in job openings and offers rates on hiring and quits. The median estimate is 7.293 million.

Over the next few weeks there will be calls for easier credit conditions from the Federal Reserve, which will place a bottom on this market.

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 a sharp decline in the U.S. dollar yesterday, the greenback is higher today.

The euro currency is a little lower in spite of news that German manufacturing orders picked up more than expected in June. Manufacturing orders increased 2.5% on the month when economists had expected an increase of 0.3%. 

The Australian dollar is higher after the Reserve Bank of Australia took a break from lowering interest rates at today’s policy meeting. The RBA left its official cash rate at a record low 1.0%. However, the RBA left the door open to expanding on the cuts it made in June and July.

INTEREST RATE MARKET FUTURES

Yesterday the thirty year Treasury bond futures advanced to their highest level since November 2016. There is some long liquidation today after the PBOC said it is not a currency manipulator. 

There will be increased pressure on the Federal Reserve to ease credit conditions with, according to the U.S. Treasury, China being a currencymanipulator.

Financial futures markets are predicting there is almost a 100% probability that the Federal Open Market Committee will lower its fed funds rate by another 25 basis points at its next meeting on September 18.

The Treasury will auction three year notes today.

St. Louis Federal Reserve Bank President James Bullard will speak about the U.S. economy and monetary policy at 12:05.

In the longer term, higher prices are likely for futures, especially at the long end of the curve, as most major central banks, including the Federal Reserve, are likely to embark on a new round of easier credit policies.
 

SUPPORT AND RESISTANCE

September 19 S&P 500

Support    2772.00      Resistance    2875.00

September 19 U.S. Dollar Index

Support    96.920        Resistance    97.570

September 19 Euro Currency

Support    1.12020      Resistance    1.12940

September 19 Japanese Yen

Support    .93600        Resistance    .95080

September 19 Canadian Dollar

Support    .75530        Resistance    .75960

September 19 Australian Dollar

Support    .6753          Resistance    .6816

September 19 Thirty Year Treasury Bonds

Support    160^0         Resistance     162^0

October 19 Gold

Support    1460.0        Resistance     1483.0

September 19 Copper

Support    2.5300        Resistance     2.5700

September 19 Crude Oil

Support    53.65          Resistance     55.55

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.