Bonds Higher Despite Bearish News

STOCK INDEX FUTURES

U.S. stock index futures are higher after retail sales came in better than expected. Retail sales in October increased 1.7% when a gain of 1.0% was anticipated.

October Industrial production increased 1.6% when up 0.9% was anticipated and October capacity utilization was 76.4%, which compares to the predicted 75.8%.

There are two 9:00 central time reports. The November housing market index is estimated to be 80 and the September business inventories report is expected to show a 0.6% increase.

Inflationary pressures in the global economy are broadening and remain a concern. There are fears that inflation will stay high for longer-than-expected, which could force central banks to tighten credit policies sooner.

Countering the bearish inflation influence are the better than expected corporate earnings reports.

CURRENCY FUTURES

The U.S. dollar index advanced to its highest level since July of 2020. The larger than estimated increase in retail sales supported the greenback. In addition, the recent higher than predicted U.S. consumer price index puts pressure on the Federal Reserve to tighten credit conditions, which in turn, is bullish for the U.S. dollar.

The consumer price index data last week showed inflation rising more than expected, with October marking the sixth straight month with year-over-year inflation above 5.0%.

Then euro currency is lower despite news that the euro zone economy expanded by 2.2% in the third quarter compared with the prior three-month period, according to the European Union’s statistics agency.

The number of employed persons in the euro area increased 0.9% on quarter to 160.8 million in the three months to September 2021, accelerating from 0.7% growth in the previous period and above market expectations of 0.8%.

The euro currency was undermined when European Central Bank President Christine Lagarde said on Monday that tightening monetary policy to curb inflation could choke off the euro zone’s recovery, in an increasing contrast from hawkish comments from other central banks.

The British pound is higher on news that the U.K. unemployment rate declined further to 4.3% in the three months to September, which is the lowest since July 2020 and below expectations of 4.4%.

The Canadian dollar is lower after a report showed housing starts in Canada fell 5.3% over a month earlier to 236,554 units in October of 2021, which is the fifth straight month of decrease and below market expectations of 255,000 units, according to the Canada Mortgage and Housing Corporation.

INTEREST RATE MARKET FUTURES

Federal Reserve Bank of Richmond President Thomas Barkin said Monday that the U.S. central bank needs more data before it can make the call on when it is time to raise its short-term interest rate target.

Most analysts expect a first rate hike in July, especially given the signs that U.S. inflation is gathering pace.

Federal Reserve speakers today are Raphael Bostic at 11:00, Patrick Harker at 1:55 and Mary Daly at 2:30.

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