Articles
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More Economic Stimulus from China on the Way
STOCK INDEX FUTURES
Prices advanced after China indicated it will take additional steps to support economic growth, including increasing its fiscal deficit and adding more stimulus to the housing market.
The November Chicago Federal Reserve national activity index was negative .30, which compares to the estimate of positive .10.
In spite of the hike in the fed funds rate last week and prospects of additional rate increases next year, we remain long term bullish on stock index futures.
New historical highs for all of the major stock index futures are likely in 2016.
CURRENCY FUTURES
Currencies are narrowly mixed today.
The U.S. dollar is a little lower as last week’s interest rate hike from the Fed appears to be fully priced into the market.
The euro currency is higher in spite of a weaker than expected German produce price index report.
The Japanese yen is a little higher after Japans government said Japan’s economy is recovering moderately.
Lower crude oil prices put mild pressure on the Canadian dollar and the Australian dollar.
INTEREST RATE MARKET FUTURES
The front end of the curve is a little lower, as the consensus view remains that the Fed will increase interest rates several times next year.
The FOMC forecast the fed funds rate will be 1.375% at the end of 2016, which suggests an additional four 25 basis point increases, while a survey of economists predicted the Fed will increase interest rates three times next year.
This contrasts our analysis, which indicates the Fed will increase rates only two times in 2016.
The probability of a 25 basis point increase in the fed funds rate at the March 16, 2016 Federal Open Market Committee meeting is 52%.
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