By Alan Bush | Senior Financial Economist at ADMIS
Global equity markets were support by news that China's central bank moved to support the economy by reducing reserve requirements for lenders.
U.S. stock index futures are higher in spite of the overall weaker than expected U.S. employment numbers.
The U.S. economy added 130,000 payrolls in August, which compares to the anticipated 163,000 gain. The unemployment rate was unchanged at 3.7% for the third consecutive month, as expected, and remains near a 50-year low. Average hourly earnings increased .4% when up .3% was estimated.
Federal Reserve Chairman Jerome Powell will deliver a speech entitled “Economic Outlook and Monetary Policy” at the University of Zurich in Zurich, Switzerland at 11:30 AM.
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.
The U.S. dollar index came under pressure when the on balance weaker than expected employment report was released.
The euro currency is higher in spite of news that the euro zone economy grew at an annualized rate of 0.8% in the second quarter, which is down from 1.7% in the three months through March.
The Canadian dollar is higher on news that the Canadian economy added a net 81,100 jobs in August. Market expectations were for a 15,000 increase.
The People’s Bank of China said it is cutting banks’ reserve requirements for the third time this year, which supported the Australian dollar.
Futures were lower in the overnight trade. However, prices quickly advanced when the overall weaker than anticipated U.S. employment numbers were released.
Market participants believe there is a 93% probability that the Federal Open Market Committee will lower its fed funds rate by another 25 basis points at its next meeting on September 17-18. Currently there is only a 56% probability of another rate cut at the October meeting.
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.
September 19 S&P 500
Support 2965.00 Resistance 2992.00
September 19 U.S. Dollar Index
Support 98.200 Resistance 98.530
September 19 Euro Currency
Support 1.10200 Resistance 1.10680
September 19 Japanese Yen
Support .93370 Resistance .93880
September 19 Canadian Dollar
Support .75360 Resistance .75970
September 19 Australian Dollar
Support .6800 Resistance .6859
December 19 Thirty Year Treasury Bonds
Support 163^2 Resistance 164^20
December 19 Gold
Support 1507.0 Resistance 1539.0
December 19 Copper
Support 2.6150 Resistance 2.6500
October 19 Crude Oil
Support 54.73 Resistance 56.87
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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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The risk of loss in trading futures and options on futures can be substantial. Each investor must carefully consider whether this type of investment is appropriate for them. Past performance is not necessarily indicative of future results.