By Alan Bush | Senior Financial Economist at ADMIS
Global equity markets firmed on news that economic data from Europe came in better than forecast, while expectations remained in place for easier credit policies from central banks.
There was additional support for U.S. stock index futures when U.S. Treasury Secretary Steven Mnuchin today said he does not see the threat of a recession, as the Trump administration attempts to revive trade negotiations with China. In addition, Mnuchin said, "We will have discussions with China over currency issues in next rounds of talks."
The 2:00 central time July consumer credit report is expected to show a $16 billion increase.
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 euro currency is higher after data released today showed German exports unexpectedly increased in July.
The European Central Bank will hold its policy meeting on Thursday. Financial futures are pricing in a 72% chance that the ECB will cut interest rates by 20 basis points. Also, some analysts are suggesting the ECB may start buying euro zone equities and not just government bonds in a new wave of quantitative easing.
The British pound is higher on news that the U.K. economy showed unexpected strength in July, which dampened recession fears. The U.K. GDP was up 0.3% in July, the largest gain since January, which was stronger than all forecasts and better than the median estimate of a 0.1% increase.
The Canadian dollar and the Australian dollar are higher in response to stronger crude oil prices.
Flight to quality longs were liquidated in light of higher stock index futures and a more optimistic outlook for a U.S.-China trade deal.
Market participants believe there is a 91% 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 58% 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 2977.00 Resistance 3000.00
September 19 U.S. Dollar Index
Support 98.100 Resistance 98.530
September 19 Euro Currency
Support 1.10170 Resistance 1.10680
September 19 Japanese Yen
Support .93370 Resistance .93800
September 19 Canadian Dollar
Support .75850 Resistance .76100
September 19 Australian Dollar
Support .6834 Resistance .6882
December 19 Thirty Year Treasury Bonds
Support 162^28 Resistance 164^20
December 19 Gold
Support 1510.0 Resistance 1528.0
December 19 Copper
Support 2.6100 Resistance 2.6400
October 19 Crude Oil
Support 56.45 Resistance 57.87
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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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