The Global Economy is Stabilizing

November 11, 2019

STOCK INDEX FUTURES

U.S. stock index futures declined, as President Donald Trumps comments dampened expectations for a U.S.-China trade deal. On Saturday President Trump said the U.S. would only make an agreement if it was the right deal for America. He also said the talks had moved more slowly than he would have liked.

In addition, stock index futures were adversely affected by escalating violence in Hong Kong that pushed Asian equity markets to their worst day since August.

My view remains that the global reflation scenario is on track and easier credit conditions, although likely at a much slower pace, from most of the worlds central banks are coming and will be the dominant fundamental that supports stock index futures in the long term.

CURRENCY FUTURES

The euro currency is higher after a survey of economists indicated the European Central Bank will keep its deposit rate unchanged through the first quarter of 2020. A previous survey showed the ECB would cut interest rates by an additional 10 basis points by the first quarter of 2020. This suggests the economy of the euro zone is stabilizing.

The British pound is higher after Brexit Party leader Nigel Farage said he would not challenge the Conservative party in 317 of the 650 seats that are up for grabs in the upcoming U.K. elections.

In addition, there was support for the pound on news that the U.K. economy returned to growth in the third quarter after shrinking in the second quarter. The British economy expanded 0.3% in the third quarter compared with the second quarter.

There was some flight to quality buying coming into the Japanese yen. Also, there was support from news that bank lending in Japan in October increased 2.2% on the year.

INTEREST RATE MARKET FUTURES

Futures are higher in reaction to lower stock index futures and increasing political unrest in Hong Kong.

Economists believe there is a 49% probability that the Federal Open Market Committee will lower its fed funds rate by another 25 basis points at the conclusion of its December 16, 2020 policy meeting.

It was only a several weeks ago that the financial futures markets were predicting an additional 25 basis point reduction in the fed funds rate in the first quarter of next year.

There are indications that the global economy is beginning to stabilize, which suggests major central banks are likely to push farther out into the future additional easing measures. As a result, interest rate market futures are likely to trade only sideways.

The flight to quality influence is likely to reemerge, however, from time to time, as it is today.

SUPPORT AND RESISTANCE

December 19S&P 500

Support 3072.00 Resistance 3097.00

December 19 U.S. Dollar Index

Support 97.920 Resistance 98.260

December 19Euro Currency

Support 1.10350 Resistance 1.10740

December 19Japanese Yen

Support .91650 Resistance .92060

December 19Canadian Dollar

Support .75480 Resistance .75730

December 19Australian Dollar

Support .6852 Resistance .6878

December 19 Thirty Year Treasury Bonds

Support 156^0 Resistance 157^6

December 19Gold

Support 1456.0 Resistance 1472.0

December 19Copper

Support 2.6500 Resistance 2.6950

December 19 Crude Oil

Support 56.03 Resistance 57.55

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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