Expect Higher Prices for Flight to Quality Vehicles

by Archer Financial Services | Jul 01, 2019

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

Stock index futures are sharply higher, including new record highs for the S&P 500, as President Donald Trump and Chinese President Xi Jinping at this weekend’s G20 Summit agreed to re-start trade talks. 

Despite ongoing trade tensions and slowing growth around the world, the U.S. stock market just had its best first half of the year since 1997.The S&P 500 advanced 17% since the beginning of the year, which is the biggest gain for the first six months of the year in over two decades and the Dow Jones Industrial Average rallied 7.2% in June, which is its best June since 1938, when it advanced 24.3%.

The 8:45 central time PMI manufacturing index is expected to be 50.1.

There are two 9:00 reports. The June Institute for Supply Management index is anticipated to be 51.2 and the 9:00 May construction spending report is estimated to show a .1% 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.
 

CURRENCY FUTURES

The U.S. dollar is higher due to the better tone to the U.S-China trade talks. In addition, there was some support for the greenback when Tom Barkin, president of the Federal Reserve Bank of Richmond, said it was too soon to say whether global economic weakness would cause the central bank to lower interest rates at its next meeting on July 30-31.

The euro currency is lower in spite of news that the unemployment rate in the euro zone fell to an 11-year low.     

The British pound is lower on news that U.K. factory output contracted at the fastest rate in over six years in June. 

The Japanese yen is lower after a report showed sentiment among Japan's large manufacturers deteriorated to the weakest level in almost three years in the three months to June.
 

INTEREST RATE MARKET FUTURES

Financial futures markets are predicting there is almost a 100% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points or more at its July 30-31 policy meeting. A July rate cut would be the first reduction in a decade. A second and possibly a third rate cut is anticipated by financial futures markets later this year.

In the longer term, higher prices are likely for futures, as most major central banks are likely to embark on a new round of accommodation.

All of the flight to quality vehicles that are lower today because of the perceived better feeling about the U.S.-China trade situation are likely to at least partially recover from the current lower levels. Expect recovery gains in the Japanese yen, the Swiss franc, gold and the interest rate futures markets.
 

SUPPORT AND RESISTANCE

Support    2961.00      Resistance    2989.00

September 19 U.S. Dollar Index

Support    95.700        Resistance    96.260

September 19 Euro Currency

Support    1.13800      Resistance    1.14500

September 19 Japanese Yen

Support    .92590        Resistance    .93130

September 19 Canadian Dollar

Support    .76370        Resistance    .76660

September 19 Australian Dollar

Support    .7000          Resistance    .7055

September 19 Thirty Year Treasury Bonds

Support    154^20       Resistance     155^26

August 19 Gold

Support    1381.0        Resistance     1405.0

September 19 Copper

Support    2.6950        Resistance     2.7650

August 19 Crude Oil

Support    59.03          Resistance     60.55



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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