STOCK INDEX FUTURES
Prices are higher due to a better tone to the financial situation in the euro zone. European Union leaders yesterday agreed on a fiscal discipline plan that would impose sanctions on high budget deficit member nations.
The fourth quarter employment cost index increased .4%, as expected.
The November, seasonally adjusted S&P/CaseShiller 20 city home price index declined .7%, when down .5% was anticipated.
The 8:45 central time, January Chicago purchasing managers index is expected to be 63 and the 9:00 January consumer confidence index is anticipated to be 68.
According to a Bloomberg report, approximately 67% of the 178 corporations in the S&P 500 that have reported earnings since January 9 have beat analysts' estimates.
CURRENCY FUTURES
European Union leaders held their first summit of the year yesterday in Brussels in an ongoing effort to control the euro zone debt crisis. European Union leaders agreed on a fiscal discipline plan. Only the Czech Republic and the U.K. refused to sign the agreement on grounds that too much of their sovereignty would be given up.
There was some support for the euro after Greek Prime Minister Papademos said progress had been made in debt swap negotiations with the private holders of Greek sovereign debt. He also said he expected to complete a deal this week.
German unemployment declined to a 20-year low in January, which was better than analysts had expected.
Strength in the euro was limited by news that the yield on Portuguese two-year notes increased to another record high. Some analysts are calling Portugal the "second Greece."
In addition to the problems in Greece and Portugal, some analysts are predicting Spain will suffer a lengthy recession, as their gross domestic product shrinks.
The British pound is higher even though U.K. mortgage approvals increased less than anticipated in December and consumer credit declined by the largest amount on record. We are hearing more talk that the Bank of England will announce another round of quantitative easing next month in an effort to stimulate the U.K. economy.
The Japanese yen is lower after Japan's finance minister threatened to take "decisive" measures to limit the strength of the yen. There was some support for the yen after a government report showed Japan's factory production increased 4% in December, which compares to the estimate of a 3% increase.
In spite of the strength in the euro today, our analysis indicates the euro zone economy will enter into recession and the value of the euro will decline against the U.S. dollar.
INTEREST RATE MARKET FUTURES
Prices are a little lower due to the better tone to the financial situation in the euro area.
In the longer term, Treasury futures are likely to be supported by a variety of flight to quality influences.
In addition to the bullish influence of continuing tensions in the Middle East, there are increasing prospects of a recession in the euro zone, a trend toward weaker economic data from China, along with fears that the Chinese economy is headed for a hard landing.
For more marketplace information, I can be reached at 312.242.7911 or via e-mail at alan.bush@archerfinancials.com.
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