Overnight Optimism on U.S.-China Trade Fades

November 18, 2019

STOCK INDEX FUTURES

S&P 500, Dow and NASDAQ futures advanced to record highs in the overnight trade due to U.S.-China trade optimism. In addition, there was support for global equity markets on news of an unexpected Chinese interest rate cut. China's central bank lowered its regular reverse repurchase rate for the first time since October 2015 in an effort to increase market confidence and boost economic growth.

However, after surging overnight, U.S. equity futures markets quickly gave back the gains on reports that China is less optimistic about a deal with the U.S., as Hong Kong tensions soar.

The 9:00 central time November housing market index is expected to be 71.

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 U.S dollar is lower, although interest rate differential expectations remain slightly bullish on balance for the greenback.

The euro currency is higher due to recent indications that the euro zone economy is stabilizing. However, the Bundesbank was not that optimistic when today it said Germanys economy will probably stagnate in the fourth quarter and there is little sign of a rebound any time soon.

The British pound gained against the U.S. dollar, as weekend opinion polls showed U.K. Prime Minister Boris Johnson's party has the highest level of support since 2017.

The pound is higher despite news that a measure of U.K. household finance remained unchanged in November.

INTEREST RATE MARKET FUTURES

There is flight to quality buying today in light of a less optimistic tone to the U.S.-China trade situation.

Cleveland Federal Reserve Bank PresidentLoretta Mesterwill speak at 11:00.

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.

Financial futures markets are suggesting there is a 51% probability that the Federal Reserve 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 only sideways, although the flight to quality influence is likely to reemerge from time to time, as it is today.

INDUSTRIAL COMMODITIES

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

SUPPORT AND RESISTANCE

December 19S&P 500

Support 3108.00 Resistance 3129.00

December 19 U.S. Dollar Index

Support 97.670 Resistance 97.940

December 19Euro Currency

Support 1.10620 Resistance 1.10950

December 19Japanese Yen

Support .91740 Resistance .92250

December 19Canadian Dollar

Support .75470 Resistance .75740

December 19Australian Dollar

Support .6800 Resistance .6828

December 19 Thirty Year Treasury Bonds

Support 157^24 Resistance 159^2

December 19Gold

Support 1454.0 Resistance 1477.0

December 19Copper

Support 2.6200 Resistance 2.6550

January 20 Crude Oil

Support 57.03 Resistance 58.32

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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