Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher with NASDAQ futures advancing to record highs.
Investors are looking to the release of the Federal Reserve’s June meeting minutes at 1:00 central time for more clues on when the central bank may begin tapering its asset-buying program.
Mortgage applications declined 1.8 % in the week ended July 2, which is the second consecutive decline, and pushed the index down to the lowest since the beginning of 2020. Applications to refinance a home loan were down 2.3% and those to purchase a home fell 1.1%.
The 9:00 central time May Job Openings and Labor Turnover Survey (JOLTS) is predicted to show 9.3 million. The Labor Department’s JOLTS report tracks monthly changes in job openings and offers rates on hiring and quits.
CURRENCY FUTURES
The European Commission revised upwards its euro zone GDP forecasts for 2021 and 2022. The euro zone is seen expanding by 4.8% this year and 4.5% in 2022, compared with May estimates of 4.3% and 4.4%, respectively.
Germany’s industrial output dropped by 0.3% for a second consecutive month in May 2021, missing market expectations of 0.5% growth, led by declines in the production of capital goods and energy.
House prices in the U.K. increased 8.8% year-on-year in June of 2021, following an upwardly revised 9.6% gain in the previous month, which was the highest in 14 years.
Yesterday, the au Jibun Bank Japan Services PMI came in at 48.0 in June 2021, which is the 17th consecutive month of contraction.
INTEREST RATE MARKET FUTURES
Futures advanced yesterday with follow-through gains today after yesterday’s release of the June Institute for Supply Management services sector index, which fell short of economists’ expectations.
Government bond yields dropped to their lowest level in over four months.
Raphael Bostic of the Federal Reserve will speak at 2:30.
The U.S. Treasury yield curve has flattened recently with shorter-dated yields increasing to reflect higher rate expectations, while longer-dated yields fell because higher interest rates in the near term would likely mean a slower rate of growth in the future.
A flattening yield curve suggests the rate of inflation has already peaked and the rate of growth in the global economy may be slowing.
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