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CPI Higher but Less than Expected


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September 13, 2018

STOCK INDEX FUTURES

U.S. stock index futures are higher after China today said it welcomed an invitation by the U.S. to hold a new round of trade talks, as Washington prepares to further escalate the U.S.-China trade war with tariffs on $200 billion worth of Chinese goods. It is unclear when these talks could take place.

The U.S. labor market continues to remain strong as initial weekly jobless claims remain near 49 year lows that were registered in the previous week.

Jobless claims fell 1,000 to 204,000 in the week ended September 8. The consensus forecast called for initial claims to be near 210,000.

U.S. consumer prices advanced for a fifth straight month in August, although the pace of annual increases slowed for the first time this year.

Consumer prices increased a seasonally adjusted 0.2% in August from the previous month, while excluding volatile food and energy components, prices increased 0.1%.

Economists had anticipated a 0.3% gain in August for the headline number and a 0.2% advance in the core inflation rate.

The still relatively low interest rate environment remains long term supportive to U.S. stock index futures.

CURRENCY FUTURES

The U.S. dollar is lower after the smaller than expected increase in the U.S. consumer price index was released.

The Governing Council of the European Central Bank left interest rates unchanged today and reaffirmed its plan to end bond purchases by the end of the year.

The central bank said the interest rate on its main refinancing operations and the interest rates on its marginal lending facility and the deposit facility will remain at 0.00%, 0.25% and negative 0.40%, respectively.

In addition, the Governing Council said in its policy statement that it expects key ECB interest rates to remain at current levels at least through the summer of 2019.

The British pound is higher after the Bank of England left interest rates on hold at 0.75% as expected, but warned about the "greater uncertainty" around the Brexit negotiations.

The Bank's Monetary Policy Committee voted 9-0 to leave rates unchanged, after a quarter of a percentage point increase last monthtook interest rates to the highest level since March 2009.

The Canadian dollar is higher in spite of news that the annual growth rate of Canada's new house price index slowed to 0.5% in July from 0.8% in June, which is the slowest since January of 2010.

INTEREST RATE MARKET FUTURES

Futures firmed on news that the U.S. consumer price index was smaller than estimated.

The Treasury will auction thirty year bonds today.

Atlanta Federal Reserve Bank PresidentRaphael Bostic will speak at 11:30.

According to financial futures markets, the probability of a fed funds rate increase at the Federal Open Market Committees September 26 meeting is close to 100%, and the probability of another fed funds rate hike in December is 79%.

The long term trend for futures is lower as the U.S. economy remains strong and the FOMC will likely continue on its tightening path.

SUPPORT AND RESISTANCE

September 18 S&P 500

Support 2884.00 Resistance 2905.00

September 18 U.S. Dollar Index

Support 94.370 Resistance 95.010

September 18 Euro Currency

Support 1.16040 Resistance 1.17060

September 18 Japanese Yen

Support .89530 Resistance .90000

September 18 Canadian Dollar

Support .76780 Resistance .77160

September 18 Australian Dollar

Support .7159 Resistance .7237

December 18 Thirty Year Treasury Bonds

Support 141^26 Resistance 142^24

December 18 Gold

Support 1206.0Resistance 1221.0

December 18 Copper

Support 2.6700 Resistance 2.7250

October 18 Crude Oil

Support 69.01 Resistance 70.40

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About the author


Alan Bush has been a commodity analyst since 1976 focusing on the fundamental and technical aspects of stock index, interest rate and foreign currency markets. He has authored several articles for Stocks Futures and Options magazine and produced the “Futures Tech Focus” program, which is a technically based market outlook.

Alan served on the faculty of Oakton College as instructor of a course entitled, “Principles of Technical Analysis.” He has been interviewed on many national television programs, appearing on the Nightly Business Report, CNBC, CNN Moneyline, Reuters Television and Web FN. In addition, he has been frequently quoted in The Wall Street Journal, USA Today, The Bond Buyer and the Chicago Tribune and has been regularly interviewed on Chicago’s WMAQ radio business reports.

Alan can be reached at (312) 242-7911, or via email at alan.bush@admis.com.

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