March 15, 2010
STOCK INDEX FUTURES
China's stock market fell to a five week low due to fears of the possibility of additional tightening measures. There is a growing belief that China's central bank will increase reserve ratios or interest rates in the near future. This, in turn, put mild pressure on European and North American equity markets due to ideas that this could result in a slower global economic recovery.
The 7:30 Central Time March Empire Manufacturing Index was 22.86 when 22 was anticipated.
February industrial production was up .1%, which compared to an estimate of unchanged and February Capacity Utilization was 72.7%, when 72.5% was guessed.
The 12:00 March National Association of Home Builders Housing market index is expected to be 17.
Our analysis continues to suggest that the majority of economic reports will be stronger than the analysts' estimates.
In spite of the current lower prices for stock index futures this morning, we are anticipating a move to higher on the day.
Our research continues to tell us that this bull market will continue through 2010.
CURRENCIES
After three days of decline, the U.S. dollar is higher on the belief that the global economic recovery could slow if China takes additional steps to restrict their economic growth.
The euro is lower after the German finance minister made comments that reduced expectations that there will be a near term aid package for Greece at a two meeting in Brussels that started today.
The British pound fell after Moody's Investors Service said the U.K. is moving "substantially" closer to losing its AAA rating, as the cost of servicing their debt increases.
The Swiss franc advanced to a 17 month high against the euro on ideas that the Swiss economy will outperform the euro zone economy.
The Japanese yen is lower on the belief that the Bank of Japan will ease monetary policy further at their policy meeting on March 16-17. In addition, the yen continues to be undermined by threats of BOJ intervention against the yen.
In the longer term, the Canadian dollar is likely to trade higher due to favorable interest rate differential expectations, along with prospects of higher commodity prices.
Currently, financial markets are factoring in a 22% chance that the Bank of Canada will increase their benchmark interest rate by 25 basis points to 50 basis points at their June meeting and there is virtually a 100% probability that they will increase the rate by 25 basis points at the July meeting.
The Reserve Bank of Australia is also expected to continue to increase interest rates.
In the long term, the Australian currency is likely to be the strongest currency this year, followed by the Canadian dollar.
INTEREST RATES
There was almost no reaction after Moody's said the U.S. is moving "substantially" closer to losing its AAA credit rating.
The Federal Open Market Committee is scheduled to meet tomorrow. A statement from the Committee will be released after the meeting at approximately at 1:15.
Currently, financial markets are factoring in a 97% probability that the Federal Open Market Committee will increase their fed funds target by 25 basis points to 50 basis points on or before their November 3 meeting.
We also believe that we are in the early stages of a new bear market for Treasury futures and the thirty year Treasury bond is likely to be the weakest performer.
If you have any questions about this article, please contact us at 1.877.690.7303 or send an email to alan.bush@archerfinancials.com. Additional research can be found at www.archerfinancials.com/research.aspx.
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