By Alan Bush | Senior Financial Economist at ADMIS
U.S. equity futures are higher following steep declines in the previous session, as China took steps to reduce pressure on its economy from the impact of the coronavirus epidemic.
However, stock markets in mainland China were sharply lower after their markets reopened with the end of the Lunar New Year holidays.
China’s central bank lowered reverse repo rates by 10 basis points and injected 1.2 trillion yuan ($171 billion) into the economy to limit the economic damage from travel curbs and business shut-downs.
The 8:45 central time January U.S. PMI manufacturing index is expected to be 51.7 and the 9:00 December construction spending report is anticipated to show an increase of 0.5%.
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 rescue this market.
The U.S. dollar is higher 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 lower in spite of news that the euro zone January manufacturing PMI was 47.9 when 47.8 was estimated and the German January manufacturing PMI was 45.3 when the forecast was 45.2.
The U.K. formally exited the EU on Friday and entered into a transition period. The British pound declined, as fears over a hard Brexit resurfaced after U.K. Prime Minister Boris Johnson warned that he was prepared to walk away from discussions with the EU, if he did not get a free trade agreement. Prime Minister Johnson said he wanted a free trade agreement similar to the terms the bloc has with Canada, which imposes no tariffs, or quotas on trade in goods.
The U.K. January manufacturing PMI was 50 when 49.8 was predicted.
The Reserve Bank of Australia will hold its regularly scheduled policy meeting tomorrow. No change in policy is expected.
Futures are lower, as flight to quality longs are liquidated, following recovering stock index futures.
Raphael Bostic of the Federal Reserve will speak at 3:30.
In light of the negative impact of the coronavirus on global economic growth, major central banks will come under pressure to add more accommodation.
Currently there is a 58% probability that the Federal Open Market Committee will lower its fed funds rate at its June 10 policy meeting,
March 20 S&P 500
Support 3217.00 Resistance 3258.00
March 20 U.S. Dollar Index
Support 97.160 Resistance 97.660
March 20 Euro Currency
Support 1.10740 Resistance 1.11280
March 20 Japanese Yen
Support .92150 Resistance .92620
March 20 Canadian Dollar
Support .75400 Resistance .75660
March 20 Australian Dollar
Support .6680 Resistance .6720
March 20 Thirty Year Treasury Bonds
Support 162^16 Resistance 164^8
April 20 Gold
Support 1574.0 Resistance 1600.0
March 20 Crude Oil
Support 50.37 Resistance 52.50
March 20 Copper
Support 2.4850 Resistance 2.5700
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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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