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Interest Rate Market Futures and Japanese Yen the Best Performers

By Alan Bush | Senior Financial Economist at ADMIS   

 

STOCK INDEX FUTURES

The CME Group today announced it will close its Chicago trading floor as of the close of business Friday, March 13, 2020, as a precaution to reduce large gatherings that can contribute to the spread of coronavirus. All products will continue to trade on CME Globex as they do today. The CME said no coronavirus cases have been reported at the Chicago Board of Trade trading floor.

Initial jobless claims decreased 4,000 in the week ended March 7 to 211,000. Economists forecasted 219,000 new claims.

The producer price index declined 0.6% in February compared with January, when economists expected a 0.1% decline. The producer price index, excluding the often-volatile food and energy categories, fell 0.3% from January when an increase of 0.2% was anticipated.

Stock index futures are sharply lower after President Donald Trump banned travel from continental Europe to stem the coronavirus.   Of course, this will slow down an already weakening global economy, but hopefully it will be successful in containing the coronavirus earlier.

While traders focus on the negative bearish influence of the coronavirus, and rightly so, it will be the bullish impact of substantially easier credit from the world’s central banks that will dominate in the long term.

CURRENCY FUTURES

The safe-haven Japanese yen was the best performer today.

The European Central Bank at its policy meeting today left its credit policies unchanged at its meeting today. There was speculation that the ECB would follow other central banks in adding more accommodation in an effort to shield economic growth from the impact of the coronavirus.

Yesterday, the Bank of England cut its benchmark interest rate by 50 basis points to 25 basis points from 75 basis points. The BOE last cut its key interest rate in August 2016. 

Australia said it would spend $11.42 billion to try to stave off a recession. Prime Minister Scott Morrison said spending would be targeted at small and medium-size businesses, the unemployed and pensioners. Recently Australia's central bank cut interest rates to a record low 50 basis points. 
 

INTEREST RATE MARKET FUTURES

Flight to quality buying is coming into the interest rate futures markets, as U.S. Treasury yields fell sharply.

The Treasury will auction 30-year notes today.

Based on financial futures markets, there is virtually a 51% probability of a 75 basis point cut in the fed funds rate to 25 to 50 basis points and a 49% probability of a 100 basis point cut to zero to 25 basis points at the March 18 Federal Open Market Committee meeting.
 

GOLD FUTURES

In light of sharply lower stock markets around the world, traders are liquidating all assets, even the safe haven-asset of gold to meet margin calls. This is similar to what happened on February 28 when gold and stock index futures fell in tandem.

SUPPORT AND RESISTANCE

March 20 S&P 500

Support    2470.00      Resistance    2775.00

June 20 U.S. Dollar Index

Support    96.000        Resistance    97.210

June 20 Euro Currency

Support    1.12400      Resistance    1.13830

June 20 Japanese Yen

Support    .95650        Resistance    .97440

June 20 Canadian Dollar

Support    .72100        Resistance    .72700

June 20 Australian Dollar

Support    .6320          Resistance    .6495

June 20 Thirty Year Treasury Bonds

Support    177^16       Resistance     184^16

April 20 Gold

Support    1584.0        Resistance     1653.0

April 20 Crude Oil

Support    29.75           Resistance     33.79

May 20 Copper

Support    2.4200        Resistance     2.4850



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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