Written Commentary
Ag Market View for Dec 13.24
December 13, 2024
STOCK INDEX FUTURES
Stock index futures are lower due to mounting concerns about an escalation of the Ukraine-Russia conflict.
Housing starts in October were 1.311 million when 1.3 million were expected, and permits were 1.416 million when 1.4 million were anticipated.
The long term fundamentals and technicals remain supportive to stock index futures, although today is probably not the day to attempt the long side.
CURRENCY FUTURES
The U.S. dollar index is higher in a flight to quality move in light increasing concerns about an escalation over the Ukraine-Russia conflict.
The fundamentals and technicals remain supportive to the U.S. dollar and are bearish for the euro currency and the British pound.
The euro zone consumer price index in October increased 0.3% on the month as expected, and the core consumer price index was up 0.2% when a gain of 0.2% was anticipated.
The euro weakened, nearing an over-one-year low that was hit last week, as concerns over how U.S. trade tariffs’ will impact euro zone economic growth. Also, European Central Bank officials, including Vice-President Luis de Guindos and Bundesbank President Joachim Nagel warned that new U.S. trade tariffs could limit economic growth in the euro zone.
In addition, geopolitical tensions weighed on sentiment in the euro zone.
The ECB has lowered interest rates three times since June as inflation nears its 2.0% target. The ECB is expected to reduce its key interest rate by 25 basis points at its December 12 policy meeting.
There are expectations that the ECB will lower its key interest rates more aggressively than the Federal Reserve, which is likely to put additional pressure on the euro.
The Japanese yen is higher after Japan’s finance minister suggested the government might intervene if the yen continues to depreciate too quickly.
It was reported yesterday that Canadian housing starts in October increased 8% versus the previous month.
INTEREST RATE MARKET FUTURES
Futures are higher across the board due to a flight to quality flow of funds.
Jeffrey Schmid of the Federal Reserve will speak at 12:10 PM on the economic and monetary policy outlook.
There is a 62% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its December 18 policy meeting, and there is a 38% chance of the FOMC keeping rates unchanged at 4.50% – 4.75%.
It is likely that the FOMC will be slower to add accommodation in 2025 than the consensus view.
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