Indices Performing Well

STOCK INDEX FUTURES

Stock index futures are higher on the last trading day of July on ideas that central banks are nearing an end to their tightening cycle.

In addition, traders continue to focus on corporate earnings results.

The 8:45 central time July Chicago PMI is expected to be 43.5.

The 9:30 July Dallas Federal Reserve manufacturing index is anticipated to be -22.5.

Most analysts appear to be bearish on balance, which from a contrarian point of view, suggests higher prices for stock index futures at least in the short run.

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CURRENCY FUTURES

Consumer prices in the euro zone grew by 5.3% this month versus 5.5% in June, extending a downtrend that started late last year. Excluding energy and unprocessed food, prices increased  6.6% after a 6.8% advance a month ago. The European Central Bank’s target for inflation is 2.0%.

The euro zone economy grew by 0.3% in the second quarter of 2023 after a flat first quarter, and slightly surpassed the market consensus of a 0.2% expansion.

Japan’s industrial output increased 2.0% in June from a month prior on a seasonally adjusted basis, missing the 2.4% median market forecast.

The Reserve Bank of Australia will hold its policy meeting tomorrow. Australia’s policy tightening campaign may be coming to an end. Economists are divided over the timing of the RBA’s likely last interest rate increase in this cycle.

INTEREST RATE MARKET FUTURES

Financial futures markets are predicting there is an 80% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at its September 20 policy meeting, and there is a 20% probability of a 25 basis point increase.

The Federal Open Market Committee’s 25 basis point increase in its fed funds rate on July 26 is probably the last one in this cycle.

 

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