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Analysts Scaling Back Estimates of Extent of Likely ECB Easing

by Archer Financial Services | Sep 10, 2019

By Alan Bush | Senior Financial Economist at ADMIS   
 

STOCK INDEX FUTURES

Global equity markets were pressured, as traders moderated their expectations about how much central banks are likely to lower interest rates in the coming days.  

The U.S. National Federation of Independent Business small business sentiment index fell 1.6 points to 103.1 in August, which compares to the median estimate of 103.5.

At 9:00 central time, the U.S. Labor Department will release its July job openings and labor turnover survey (JOLTS).The JOLTS report tracks monthly changes in job openings and offers rates on hiring and quits. The median estimate is 7.311 million.  

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

The European Central Bank will hold its policy meeting on Thursday. Traders are scaling back their estimates of how much the ECB will likely lower interest rates at that meeting.

Analysts expect the ECB will cut 10 basis points from benchmark interest rates. As of mid-September, the market had been pricing in a 20-basis-points reduction.

The British pound is higher after a report showed the U.K. unemployment rate held at a 45 year low. The unemployment rate held steady at 3.8% in the three months through July, remaining at its lowest level since 1974. The median estimate was 3.9%. Average earnings, including bonuses, increased 4.0% from last year, compared to the expected increase of 3.7%.

Canadian housing starts unexpectedly increased in August compared to the July report.

INTEREST RATE MARKET FUTURES

Global bond yields increased due to growing caution over the extent to which the European Central Bank will add stimulus to boost its economy this week. Also undermining futures is a more optimistic outlook for a U.S.-China trade deal.

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.

U.S. Treasury Department will sell $38 billion of 3-year notes today.

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    296100      Resistance    2987.00

September 19 U.S. Dollar Index

Support    98.150        Resistance    98.500

September 19 Euro Currency

Support    1.10310      Resistance    1.10680

September 19 Japanese Yen

Support    .93020        Resistance    .93400

September 19 Canadian Dollar

Support    .75770        Resistance    .76050

September 19 Australian Dollar

Support    .6846          Resistance    .6877

December 19 Thirty Year Treasury Bonds

Support    162^2         Resistance     163^4

December 19 Gold

Support    1492.0        Resistance     1513.0

December 19 Copper

Support    2.6000        Resistance     2.6450

October 19 Crude Oil

Support    57.55         Resistance     58.85



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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