Stock index futures advanced in the overnight trade due to on balance stronger than expected corporate earnings reports and on the growing belief that the Bank of Japan may soon boost its asset purchase plan.
In addition, there was support for stock index futures after President of the European Central Bank Mario Draghi indicated the central bank may increase its economic stimulus plan.
The September Chicago Federal Reserve National Activity Index came in at negative .37, which compares to the estimate of negative .20.
Initial jobless claims in the week ended October 17 increased 3,000 to 259,000, when 265,000 were anticipated.
The 9:00 central time September existing home sales report is expected to show an increase of 1.5% to 5.39 million.
The 9:00 September leading index is estimated to be down .1% and the 10:00 October Kansas City Federal Reserve manufacturing activity index is anticipated to be negative 9.
So far this earnings season, of the companies in the S&P 500 that have reported results, 74% of them have beaten earnings estimates and 45% have exceeded revenue expectations.
Our analysis suggests higher prices longer term for stock index futures, including new historical highs next year, since the world’s major central banks can and will add as much stimulus as is needed to support the global economy.
CURRENCY FUTURES
The U.S. dollar is higher and the euro currency is lower after the President of the European Central Bank said the central bank’s quantitative easing program could be extended beyond its scheduled September 2016 conclusion. He also said a decision to extend its QE program could be made at its December policy meeting and inflation in the euro zone will remain very low over the near term.
The ECB kept its main refinancing rate unchanged at a record low 5 basis points, which was widely anticipated.
Expect much of the gains in the U.S. dollar to be given back later today and at least a partial recovery in the euro currency.
The British pound is lower in spite of a report that showed U.K. retail sales increased at a faster rate than analysts predicted last month, increasing 1.9% in September from August.
The Japanese yen is lower on ideas that the Bank of Japan will be adding more stimulus to its economy, possibly before the end of the year.
INTEREST RATE MARKET FUTURES
Prices were mixed to lower in the overnight trade due to higher stock index futures. However, prices recovered as a result of the ECB’s bullish interest rate policy comments.
The probability of an interest rate increase from the Federal Open Market Committee at the October 28 meeting is 5%, which is unchanged from yesterday and at the March 16, 2016 meeting the probability is 53% when 52% was predicted yesterday.
Our analysis suggests the Federal Open Market Committee will not be in a position to hike rates this year, or in March of next year.
Longer term, the 10 and 30 year Treasury futures will likely trade higher as the global economy stagnates, which will be met with new and additional stimulus from many of the world’s major central banks.
