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U.S.-China Trade Optimism Renewed


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December 4, 2019

STOCK INDEX FUTURES

Stock index futures advanced following a report that the U.S. and China were moving closer to signing a phase-one trade deal.

It was just yesterday that President Donald Trump said a trade agreement with China may have to wait until after the U.S. presidential election in November 2020.

The ADP national employment report showed U.S. companies payrolls increased 67,000 last month, which compares to the median forecast of a gain of 140,000 jobs.

The 8:45 central time November PMI services index is anticipated to be 51.6 and the 9:00 November ISM nonmanufacturing index is estimated to be 54.5.

My view remains that the global reflation scenario will continue and easier credit conditions, although likely at a slower pace, from most of the worlds central banks are coming and will be the dominant fundamental that underpins stock index futures.

CURRENCY FUTURES

The U.S. dollar is lower following the weaker than estimated ADP national employment report.

The euro currency is higher on news that the euro zone November services PMI came in at 51.9 when 51.5 was forecast.

The British pound continued to advance after recent opinion polls showed the Conservative party is widening its lead over Labour before an election on December 12.

In addition, the pound was supported by news that an index of service sector activity was 49.3 in November when 48.6 was predicted.

Also, the pound was underpinned by news that a U.K. construction PMI hit 45.3, which was above expectations.

INTEREST RATE MARKET FUTURES

Flight to quality longs were liquidated in light of the more optimistic feeling on the state of the U.S.-China trade negotiations.

Randall Quarles of the Federal Reserve will speak at 9:00.

The Federal Open Market Committees next policy meeting will be held on December 10-11. No change in policy is likely.

Financial futures markets are suggesting there is a 55% probability that the FOMC will lower its fed funds rate by 25 basis points at its July 29, 2020 policy meeting. Yesterday the probability was 48%.

Interest rate market futures are likely to trade broadly sideways in the longer term, although the flight to quality influence will probably reemerge from time to time.

INDUSTRIAL COMMODITIES

If I am correct in my belief that the global economy is stabilizing, it is likely that the industrial commodities, including copper, crude oil and lumber will advance in price in the long term.

SUPPORT AND RESISTANCE

December 19S&P 500

Support 3077.00 Resistance 3116.00

December 19 U.S. Dollar Index

Support 97.350 Resistance 97.800

December 19Euro Currency

Support 1.10670 Resistance 1.11250

December 19Japanese Yen

Support .91890 Resistance .92330

December 19Canadian Dollar

Support .75100 Resistance .75480

December 19Australian Dollar

Support .6805 Resistance .6865

March 19 Thirty Year Treasury Bonds

Support 159^0 Resistance 160^12

February 19Gold

Support 1474.0 Resistance 1494.0

March 19Copper

Support 2.6200 Resistance 2.6600

January 20 Crude Oil

Support 56.17 Resistance 58.13

Contact Alan for more extensive information on these markets at 312.242.7911 or via email at alan.bush@admis.com. Thank you.


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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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