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Increased Trade Tensions Pressure Stock Index Futures and Support Flight to Quality Vehicles

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December 3, 2019

STOCK INDEX FUTURES

Stock index futures declined after President Donald Trump said a trade agreement with China may have to wait until after the U.S. presidential election in November 2020.

President Trump said he had no deadline to conclude a trade deal with China, adding that in some ways I like the idea of waiting until after the election.

In addition, President Trump expressed frustration with France's new digital-services tax and threatened tariffs against France.

My view remains that the global reflation scenario will continue and easier credit conditions, although likely at a slower pace, from most of the worlds central banks are coming and will be the dominant fundamental that underpins stock index futures.

Once the tariff rhetoric settles down higher prices are likely for futures.

CURRENCY FUTURES

The U.S. dollar is lower due to increased global trade uncertainties. The dominant long term influence is interest rate differential expectations, which remains slightly bullish on balance for the greenback.

The euro currency is steady after a report showed the euro zone October producer price index advanced 0.1% on the month, as anticipated.

The British pound strengthened after the latest opinion poll showed the Conservative party widening its lead over Labour before an election on December 12. A survey showed Conservatives increasing their lead by 12 points from last week.

In addition, the pound was supported by news that a U.K. construction PMI hit 45.3, which was above expectations.

The Australian dollar is higher after the Reserve Bank of Australia said some global economic risks have lessened recently.

INTEREST RATE MARKET FUTURES

Flight to quality buying is coming into the market in light of the increased global trade concerns.

The Federal Open Market Committees next policy meeting will be held on December 10-11. No change in policy is likely at the Feds last policy meeting of this year.

Financial futures markets are suggesting there is a 48% probability that the FOMC will lower its fed funds rate by 25 basis points at its July 29, 2020 policy meeting. Yesterday the probability was 43%.

Interest rate market futures are likely to trade broadly sideways in the longer term, although the flight to quality influence will probably reemerge from time to time, as it is today.

SUPPORT AND RESISTANCE

December 19S&P 500

Support 3071.00 Resistance 3123.00

December 19 U.S. Dollar Index

Support 97.630 Resistance 97.950

December 19Euro Currency

Support 1.10670 Resistance 1.11000

December 19Japanese Yen

Support .91550 Resistance .92200

December 19Canadian Dollar

Support .75020 Resistance .75350

December 19Australian Dollar

Support .6810 Resistance .6874

March 19 Thirty Year Treasury Bonds

Support 157^4 Resistance 159^10

February 19Gold

Support 1463.0 Resistance 1490.0

March 19Copper

Support 2.6250 Resistance 2.6600

January 20 Crude Oil

Support 55.30 Resistance 56.55

Contact Alan for more extensive information on these markets at 312.242.7911 or via email at alan.bush@admis.com. Thank you.


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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 Archer Daniels Midland Company. 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.





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