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Political Tensions in Italy Affect Financial Markets

by Archer Financial Services | Aug 09, 2019

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

U.S. stocks index futures are under pressure due to trade war fears and renewed political uncertainties in Italy.  

The U.S. producer price index increased 0.2% in July from June, as expected. However, the producer price index, excluding food and energy, fell 0.1% when a gain of 0.2% was anticipated.

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

In light of renewed political and economic tensions in Italy, the flight to quality currencies, the Japanese yen and the Swiss franc are higher.

The British pound fell to its lowest level since March 2017 after it was reported that Britain's economy shrank for the first time since 2012 in the second quarter. Output fell 0.2% in the three months to June compared with the previous quarter, which was well below forecasts of unchanged. 

Canada's unemployment rate increased in July to 5.7% when 5.5% was estimated. In addition, the Canadian economy lost 24,200 jobs in July when market expectations were for a gain of 12,500.  

INTEREST RATE MARKET FUTURES

Futures are higher as Italian political tensions sparked a flight to safety.

Matteo Salvini, leader of Italy’s League party, is calling for early elections, which triggered a move to safety in government debt outside of Italy.

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. Another rate cut after that is very likely before the end of the year.

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. 

Continue to trade the interest rate market futures from the long side, especially the 30 year Treasury bond futures.
 

SUPPORT AND RESISTANCE

September 19 S&P 500

Support    2911.00      Resistance    2938.00

September 19 U.S. Dollar Index

Support    97.240        Resistance    97.540

September 19 Euro Currency

Support    1.12060      Resistance    1.12460

September 19 Japanese Yen

Support    .94460        Resistance    .94970

September 19 Canadian Dollar

Support    .75300        Resistance    .75830

September 19 Australian Dollar

Support    .6790          Resistance    .6834

September 19 Thirty Year Treasury Bonds

Support    161^12       Resistance     162^16

October 19 Gold

Support    1498.0        Resistance     1515.0

September 19 Copper

Support    2.5800        Resistance     2.6200

September 19 Crude Oil

Support    52.21          Resistance     54.55




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.

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