ECB Leaves Rates Unchanged

December 12, 2019

STOCK INDEX FUTURES

Stock index futures advanced yesterday after Federal Reserve Chairman Jerome Powell said the Fed would like to see a move in inflation that is significant and persistent before it increases interest rates again. The Fed held rates steady and indicated it was on hold with no intention now of moving off the sidelines, unless there is a surprise change in the economic outlook.

There was follow-through strength in the overnight trade. However, prices fell when China warned it will retaliate, after reports that President Donald Trump will proceed with December 15 tariffs.

The producer price index, which is a measure of the prices businesses receive for their goods and services, remained unchanged in November from a month ago. Economists had expected prices to advance 0.2% from October.

Initial jobless claims increased 49,000 to a seasonally adjusted 252,000 in the week ended December 7. Economists anticipated 212,000 new jobless claims.

Although stock index futures are lower this morning, I would not be surprised to see a move back to higher on the day.

My view remains that the global reflation scenario will continue and easier credit conditions, although likely at a slower pace, from most of the worlds central banks are coming and will be the dominant fundamental that underpins stock index futures.

CURRENCY FUTURES

The U.S. dollar came under limited pressure after the release of U.S. producer price index and the weekly jobless claims reports.

As expected, the European Central Bank left its key interest rates unchanged today as Christine Lagarde presided over her first policy meeting as the bank's president. There were no changes or surprises. The ECB kept all its three rates unchanged as expected, and noted that rates would remain at their present or lower levels until the ECB nears its inflation goal.

At todays policy meeting, the Governing Council of the ECB decided the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50% respectively.

British voters headed to the polls today to decide between Conservatives hoping to deliver a Brexit in January and the Labour Party promising a second referendum.

INTEREST RATE MARKET FUTURES

The Federal Open Market Committee held interest rates steady yesterday, as expected, after lowering rates at its three previous meetings.

The Treasury will auction 30 year bonds today.

Financial futures markets are suggesting there is a 51% probability that the FOMC will lower its fed funds rate by 25 basis points at its July 29, 2020 policy meeting.

Interest rate market futures are likely to trade broadly sideways in the longer term, although the flight to quality influence will probably reemerge from time to time.

INDUSTRIAL COMMODITIES

If I am correct in my belief that the global economy is stabilizing, it is likely that the industrial commodities, including copper, crude oil and lumber will advance in price in the long term.

SUPPORT AND RESISTANCE

December 19S&P 500

Support 3134.00 Resistance 3161.00

December 19 U.S. Dollar Index

Support 97.000 Resistance 97.300

December 19Euro Currency

Support 1.11200 Resistance 1.11630

December 19Japanese Yen

Support .91960 Resistance .92300

December 19Canadian Dollar

Support .75740 Resistance .76040

December 19Australian Dollar

Support .6862 Resistance .6903

March 19 Thirty Year Treasury Bonds

Support 158^0 Resistance 159^10

February 19Gold

Support 1474.0 Resistance 1496.0

March 19Copper

Support 2.7600 Resistance 2.8000

January 20 Crude Oil

Support 58.55 Resistance 59.73

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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