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Central Banks To Be More Accommodative

by Archer Financial Services | Jan 31, 2020

By Alan Bush | Senior Financial Economist at ADMIS   

 

STOCK INDEX FUTURES

U.S. equity futures are lower as the coronavirus spread reduces prospects for global economic growth. The World Health Organization yesterday declared the coronavirus a public-health emergency of international concern. While the move highlighted the risks that the outbreak posed globally, the WHO stopped short of recommending restrictions on trade or travel.   

The U.S. employment cost index, which is a measure of wages and benefits for civilian workers, increased 0.7% in October through December, which matched expectations. 

Personal consumption expenditures, or household spending, increased 0.3% in December from November and personal income advanced 0.2% last month. Economists expected a 0.3% rise in both spending and personal income.

The 8:45 January Chicago PMI is expected to be 48.5 and the 9:00 January consumer sentiment index is anticipated to be 99.1.

Likely slower global economic growth, as a result of the coronavirus, will be met with more accommodation from the world’s central banks, which will ultimately rescue this market.

In spite of the negative market impact of the coronavirus, I anticipate U.S. stock index futures prices will end up higher in the first quarter.

CURRENCY FUTURES   

Although the U.S. dollar is lower today, it recently has gained against most currencies on the belief that the Federal Reserve will be less aggressive in adding more accommodation than other major central banks.

The euro currency is higher even though the euro area economy grew more slowly.  The euro zone fourth quarter preliminary gross domestic product increased 0.1% when a gain of 0.2% was estimated.

Canada's gross domestic product increased 0.1% in November from the previous month. Market expectations were for unchanged. 

Canada's industrial product price index rose 0.1% in December, following a revised 0.1% decline in the previous month.  

INTEREST RATE MARKET FUTURES

Futures are higher due to fears that the coronavirus outbreak could damage global growth, and U.S. Treasury bond yields have declined as a result.

In light of the negative impact of the coronavirus on global economic growth, major central banks will come under pressure to add more accommodation.

The recent Federal Open Market Committee meeting offered few clues as to when the central bank will lower interest rates again, but keep in mind that the Fed must eventually do what the free markets demand.

Another fed funds rate reduction of 25 basis points is coming, probably in the fourth quarter.

SUPPORT AND RESISTANCE

March 20 S&P 500

Support    3263.00      Resistance    3300.00

March 20 U.S. Dollar Index

Support    97.450        Resistance    97.850

March 20 Euro Currency

Support    1.10370      Resistance    1.10920

March 20 Japanese Yen

Support    .91830        Resistance    .92150

March 20 Canadian Dollar

Support    .75450        Resistance    .75840

March 20 Australian Dollar

Support    .6680          Resistance    .6740

March 20 Thirty Year Treasury Bonds

Support    162^2         Resistance     163^12

April 20 Gold

Support    1573.0        Resistance     1593.0

March 20 Crude Oil

Support    51.45          Resistance     53.50

March 20 Copper

Support    2.5150        Resistance     2.5700



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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