Prices advanced in the overnight trade after the Bank of Japan unexpectedly announced an increase in their asset purchase target. Japan's central bank increased their asset purchase target from $126 billion to almost $700 billion.
August housing starts were 750,000, when 767,000 were expected and building permits were 803,000, which compares to the estimate of 796,000.
The 9:00 central time, August existing home sales report is expected to show a 2% increase to 4.56 million.
There are reports that third quarter corporate earnings for S&P 500 companies could post their first quarterly decline in earnings since 2009, as sales growth slows.
Bloomberg said the S&P 500 is trading at 14.1 times estimated earnings, which is close to the highest levels since the fourth quarter of 2010.
The recent announcement of a third quantitative easing plan from the FOMC could be the last of the bullish news for a while.
Any surprises are likely to be bearish.
CURRENCY FUTURES
The euro is lower due to ideas that the financial crisis in the euro zone is a long way from being resolved, along with fears that China's economic slowdown could intensify.
The euro is also being undermined by increasing pressure on the European Central Bank to lower their benchmark interest rate.
In addition, we are seeing building resistance to European Union imposed austerity measures in some E.U. member nations.
The Japanese yen is higher, even though the Bank of Japan unexpectedly announced an increase in their asset purchase target, which normally would have been bearish the yen from an interest rate differential point of view.
The Australian dollar is higher due to the Bank of Japan's unexpected announcement of easier monetary policies.
Longer term, expect the Canadian dollar to continue to gain on the Australian dollar on ideas that the Asian and European economies will underperform the North American economy.
INTEREST RATE MARKET FUTURES
Prices are higher after Richmond Federal Reserve Bank President Lacker late yesterday said the impact of the credit crisis could impede efforts to lower the U.S. unemployment rate.
Fisher of the Federal Reserve will speak on the economy at 6:00 this evening.
The bearish inflationary worries inspired by the FOMC's third quantitative easing plan will be more than offset by the bullish influence of the slowing global economy.
Most likely, the U.S. economy will remain sluggish at best, in spite of Federal Reserve efforts to stimulate the economy.
The main trend for the credit futures market is higher and gains should be led by the longer dated Treasury futures.
I can be reached at 312.242.7911 or via e-mail at alan.bush@archerfinancials.com if you have any questions about this article.
