S&P 500 and Dow Jones futures hit record highs on Friday.
However, global equity markets are mostly lower today after China's finance minister reduced expectations for additional economic stimulus from the People's Bank of China, when he said his government will not make any major policy changes. He also said China's economy faces downward pressure.
The August Chicago Federal Reserve National Activity Index was negative .21, which compares to the estimate of .33.
The 9:00 central time National Association of Retailors August existing home sales report is estimated to show an increase of 1% to 5.2 million.
The main trend for stock index futures is higher.
CURRENCY FUTURES
The U.S. dollar made a marginal new high in the overnight trade. However, the greenback is a little lower currently. Recent strength in the U.S. dollar is primarily due to the belief that the Federal Reserve will increase interest rates next year.
The euro currency is a little higher this morning. However, longer term the euro is likely to weaken due to the belief that the European Central Bank will have to be more accommodative, in light of the slowing euro zone economy.
We would expect the British pound and the Swiss franc to gain on the euro.
The Australian dollar declined to a seven month low. The Canadian dollar is lower as well, as the "commodity currencies" come under pressure due to the declining values of the commodities that Australian and Canada export.
The Japanese yen is lower and remains near a new six year low after Bank of Japan Governor Kuroda late last week said policymakers will not hesitate to change monetary policy, if necessary. This suggests more accommodation is likely, which is bearish for the yen from an interest rate differential point of view.
Lower prices are likely for the yen.
INTEREST RATE MARKET FUTURES
Prices are higher after the Group of 20 said growth in the global economy has been uneven in a statement yesterday.
Federal Reserve speakers today are Dudley at 9:05 in New York and Kocherlakota at 5:30 this afternoon on monetary policy.
Financial futures markets are currently pricing in a 71% probability of an increase in the fed funds rate at the Fed's July 29, 2015 policy meeting. This has declined from as high as 76% last week.
Our analysis suggests the Fed will not be in a position to increase the rate until later.
Thirty year Treasury bonds started to ignore bearish news on Friday, which suggests the long end of the curve may have found a bottom.
