Stock Index Futures Partially Recover in the Overnight Session

December 5, 2018

STOCK INDEX FUTURES

Stock index futures declined yesterday as investors turned skeptical of the chances for a breakthrough in the U.S.-China trade talks.

However, stock index futures advanced in the overnight session when President Trump said he believed Chinese President Xi Jinping was being sincere at their meeting on trade and Beijing has been sending strong signals since then.

At 1:00 central time the Federal Open Market Committee will release its Beige Book on the economy. This book is produced approximately two weeks before the monetary policy meetings of the Federal Open Market Committee.

The stock index futures markets are closed today.

CURRENCY FUTURES

Currency futures markets have normal trading hours today.

The U.S. dollar weakened for a third day due to the recent decline in U.S. Treasury yields.

A less hawkish Federal Reserve is likely to put a cap on the greenback.

The euro currency is higher on better economic news. The euro zone November services PMI was 53.4, which compares to expectations of 53.1 and the euro zone November Composite PMI was 52.7 when 52.4 was predicted.

Euro zone October retail sales increased .3% on the month, which compares to estimates of a gain of .2%.

The British pound is higher in spite of news that growth in the U.K.'s services sector hit its lowest level since July 2016. The purchasing managers' index from IHS Markit/CIPS fell to 50.4 in November, which is down from 52.2 in October.

INTEREST RATE MARKET FUTURES

The interest rate futures markets are closed today.

Recent sharp gains for futures are a result of increasing indications of a slowing global economy and prospects of a less hawkish Federal Reserve in 2019.

Federal Reserve Chair Jerome Powell's testimony in Washington has been canceled.

U.S. Federal Reserve Bank Vice ChairmanRandal Quarles will speak at 7:15 this evening.

According to the financial futures markets, the probability of a fed funds rate hike at the Federal Open Market Committees December 19 policy meeting is 78%, which compares to 85% yesterday.

Financial futures markets suggest the FOMC will increase its fed funds rate only one time in 2019 with a 40% probability of a second increase.

I expect the interest rate futures market will likely trend higher in the longer term, led by the thirty year Treasury bond futures.

SUPPORT AND RESISTANCE

December 18 U.S. Dollar Index

Support 96.630 Resistance 97.180

December 18 Euro Currency

Support 1.13210 Resistance 1.13880

December 18 Japanese Yen

Support .88410 Resistance .88880

December 18 Canadian Dollar

Support .75150 Resistance .75550

December 18 Australian Dollar

Support .7275 Resistance .7366

February 19 Gold

Support 1235.0Resistance 1249.0

March 19 Copper

Support 2.7400 Resistance 2.7800

January 19 Crude Oil

Support 52.11 Resistance 54.03

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