CPI Increases Less Than Expected

STOCK INDEX FUTURES

Stock index futures are sharply higher in response to the release of the November consumer price index.

The U.S. November consumer price index report showed a 0.1% increase when a gain of 0.3% was expected. On an annualized basis the consumer price index increased 7.1% when up 7.3% was anticipated.

The November National Federation of Independent Business index was 91.9 when 90.8 was predicted. Still, this was the 11th  straight month that the index was below the 49-year average of 98.

The Federal Open Market Committee begins its two-day policy meeting today.

The fundamentals and technicals for stock index futures remain supportive.

CURRENCY FUTURES

The U.S. dollar index is substantially lower.

Interest rate differential expectations are long-term bearish for the greenback, and lower prices are likely.

The euro currency is higher. The European Central Bank is expected to deliver a dialed-down 50 basis point rate hike on Thursday, despite worries about a possible recession and signs inflationary pressures may be  easing.

Investor sentiment towards the German economy improved by more than predicted in December.

The ZEW think-tank’s forward-looking sentiment index for Germany improved to -23.3, which is up from -36.7 in November. Economists had estimated the reading would improve to -26.4.

The Bank of England and the Swiss National Bank are also expected to increase borrowing costs at their policy meetings on December 15.

The unemployment rate in the U.K. edged higher to 3.7% in the three months to October of 2022 from 3.6% in the previous period, matching market forecasts.

INTEREST RATE MARKET FUTURES

Futures are higher across the board in response to the smaller than expected increase in the November consumer price index.

The Treasury will auction 30-year bonds today.

The Federal Reserve is likely to raise rates by 50 basis points on Wednesday, following four consecutive 75 basis point hikes.

According to financial futures markets currently, there is a 79.0% probability that the Federal Open Market Committee will increase its fed funds rate by 50 basis points at the December 14  policy meeting and a 21.0% probability that the rate will be hiked by 75 basis points.

The fundamental and technical aspects are supportive for futures.

 

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