Written Commentary
STOCK INDEX FUTURES
Stock index futures are lower today after advancing to record highs last week.
Mortgage applications in the week ended April 16 in the US increased 8.6%, which is the first increase in seven weeks and the strongest gain since early January, as mortgage rates dropped to their lowest levels in two months. Home refinancing jumped 10.4% and applications to purchase a home were up 5.7%.
The long term outlook for stock index futures remains positive.
CURRENCY FUTURES
The U.S. dollar index is a little higher but remains near seven-week lows. Recent weakness in the greenback can be attributed to the recent decline in Treasury yields and the Federal Reserve maintaining its dovish policy stance.
The European Central Bank will hold its monetary policy meeting on Thursday. No changes in interest rates or guidance is expected.
The British pound is down from a seven-week high of over $1.40 hit on Tuesday, after economic data showed the U.K. inflation rate advanced to 0.7% in March, which is slightly below market forecasts of 0.8%.
The Australian dollar is higher on news that retail sales increased 1.4% month-to-month in March, after a 0.8% drop in February.
INTEREST RATE MARKET FUTURES
The Treasury will auction $24 billion of 20-year bonds today.
There are no major Federal Reserve speakers scheduled for today.
Recent declines in yields can be partially attributed to overseas money managers, especially in Japan, making large purchases of U.S. government debt.
In addition, major central banks are maintaining a unified front of maintaining accommodative policies despite inflation concerns. That would be in keeping with various Federal Reserve officials’ expectations that the increase in inflation in the U.S. will be “transitory.”
In my minority view, I am seeing indications that global economic growth may not be as strong as many analysts are predicting. A wide variety of markets are showing that this may be the case. For example, copper and crude oil have been basically trading sideways in the past two months after previous strong advances, and the 30-year Treasury bond futures stopped declining.
Central banks are likely to keep their accommodation for longer, which is a longer-term bullish influence for stock index futures, and gold and silver.
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