Evidence Global Economy is Slowing
STOCK INDEX FUTURES
S&P 500 and NASDAQ futures advanced to new record highs in the overnight trade before a move to lower on the day.
Futures have powered higher since Federal Reserve Chairman Jerome Powell on Friday said the timing of scaling back on bond purchases, which is likely to begin later this year, won’t have any bearing on decisions to hike its fed funds rate.
Mr. Powell indicated that policy makers will only gradually cut back on asset purchases, and that the Federal reserve is still a long way from raising interest rates.
The 8:45 CT August Chicago PMI is expected to be 69.8 and the 9:00 August consumer confidence index is anticipated to be 123.
In recent months stock index futures have shown a tendency to recover from bearish news. The fundamental and technical aspects remain supportive.
Consumer prices in the euro zone increased at the fastest pace in almost a decade in August. Prices were 3.0% higher in August than a year earlier, which is a pickup from the 2.2% rate of inflation recorded in July. The European Central Bank is aiming to keep inflation at 2.0%, but last month it explicitly stated that it would leave its key interest rate unchanged if a period of inflation ran above that goal and appeared likely to be “transitory.”
The ECB will hold its next policy meeting on September 9. It is likely that at that meeting the ECB will continue to communicate that monetary policy will remain loose for longer.
The number of mortgage approvals for house purchases in the U.K. decreased to 75,200 in July 2021, from a revised 80,300 in the previous month and below market expectations of 78,600. This was the lowest since July 2020.
Canada’s gross domestic product increased 0.7% in June from May, as predicted by economists.
INTEREST RATE MARKET FUTURES
There is growing evidence that growth in the global economy is slowing.
The interest rate futures markets have been indicating since May clues about the state of the global economy and inflation with the U.S. Treasury yield curve flattening. A flattening yield curve suggests a slower rate of global economic growth in the future.
Some traders continue to question why the 30-year Treasury bond futures are substantially off of their May lows if there is the need for a tapering of the Fed’s asset-purchase program.
Higher prices are likely for the 30-year Treasury bond futures.
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