PPI and FOMC Minutes Today
STOCK INDEX FUTURES
Recent strength in stock index futures is primarily due to prospects of a less hawkish Federal Reserve.
Futures recently advanced above steep downtrend lines.
The 7:30 central time September producer price index report is expected to show a 0.3% increase and, excluding food and energy, is anticipated to be up 0.2%.
The Atlanta Federal Reserve business inflation expectations report for October will be released at 9:00. The September report showed a 2.5% increase year-over-year.
At 1:00 the Federal Open Market Committee will release the minutes from its September 20 policy meeting.
The fundamental and technical factors are becoming more friendly to the bulls.
INTEREST RATE MARKET FUTURES
Recent dovish comments from Federal Reserve officials reduced expectations of another interest rate hike this year, while safe-haven demand remains in light of the war in the Middle East.
The Treasury will auction 10-year notes.
Federal Reserve speakers today are Christopher Waller at 9:15, Raphael Bostic at 11:15 and Susan Collins at 3:30.
In the last few days there has been a sizable downshift in prospects for a more hawkish Federal Reserve policy.
Financial futures markets are now predicting there is an 88% probability that the Federal Open Market Committee will keep its fed funds rate unchanged and an 12% probability of a 25 basis point increase at its November 1 policy meeting.
The Federal Reserve’s target range for the fed funds rate currently is 5.25% to 5.50%.
Despite the war in the Mideast, a safe-haven flow of funds has only marginally supported the U.S. dollar as prospects of a less hawkish Federal Reserve have undermined the greenback.
The International Monetary Fund on Tuesday said Germany was likely to suffer a deeper recession than previously estimated. Europe’s largest economy is expected to be the only one of the Group of Seven highly industrialized nations that will not see growth in 2023. The IMF said Germany’s economy is expected to shrink by 0.5% this year, after a forecast of a 0.3% contraction in July.
The Reuters Tankan sentiment index for manufacturers in Japan was +4 in October 2023, which is unchanged from the previous month.
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