Less Hawkish Fed Dominates Trade

STOCK INDEX FUTURES

Stock index futures closed sharply higher yesterday with follow-through gains today, after Federal Reserve Chair Jerome Powell, who in a speech on Wednesday, signaled that it might be appropriate for the U.S. central bank to slow its pace of monetary policy tightening. Powell said he sees the central bank in a position to reduce the size of rate hikes as soon as at the December  meeting.

This echoes recent statements from other central bank officials and comments at the November Fed policy meeting,

U.S. based employers announced 76,835 job cuts in November of 2022, which is the most since January of 2021, and compared to 33,843 in October, according to Challenger, Grey and Christmas, Inc.

Jobless claims in the week ended November 26 were 225,000 when 238,000 were expected.

Personal income in October increased 0.7% when up 0.4% was anticipated.

The 8:45 central time November PMI manufacturing final is estimated to be 47.6.

The 9:00 November Institute for Supply Management manufacturing index is predicted to be 49.9 and the 9:00 October construction report is anticipated to show a 0.1% decline.

The fundamentals and technicals for stock index futures are improving.

CURRENCY FUTURES

The U.S. dollar index is lower and is at its lowest level since August 15, as interest rate differential expectations continue to turn against the greenback.

Lower prices are likely for the U.S. dollar.

The euro currency is higher on news that the unemployment rate in the euro area fell to a new record low of 6.5% in October of 2022 from 6.6% in the prior month. This is slightly below market estimates of 6.6%.

German retail sales were down 2.8% on the month in October when a decline of 0.6% was expected.

U.K. house prices fell by the most in over two years in November and by more than predicted.

INTEREST RATE MARKET FUTURES

Futures are higher in response to yesterday’s dovish interest rate comments from Fed Chair Powell.

A majority of Federal Reserve policymakers have been hinting that soon it will be appropriate to slow the pace of interest rate hikes. At the November 2 policy meeting the Fed delivered its fourth straight 75 basis point rate hike and pushed borrowing costs to the highest since 2008.

Federal Reserve speakers today are Lorie Logan at 8:25, Michelle Bowman at 8:30, Neel Kashkari at 9:00 and Michael Barr at 2:00.

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. This is a dramatic change in expectations from early November when there was some scattered talk that the FOMC could hike the fed funds rate by as much of 100 basis points this month.

The fundamental and technical aspects have turned more supportive.

 

Interested in more futures markets?  Explore our Market Dashboards here.

Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.

ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.                  

A subsidiary of Archer Daniels Midland Company.

© 2021 ADM Investor Services International Limited.

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 information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  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.

Latest News & Market Commentary

Explore the latest edition of The Ghost in the Machine

Explore Now