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U.S.-China Phase-One Trade Deal in Focus


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January 15, 2020

STOCK INDEX FUTURES

Stock index futures are lower, as optimism on the U.S.-China trade deal was tempered by U.S. Treasury Secretary Steven Mnuchin saying tariffs on Chinese products would remain in place for now.

President Donald Trump is expected to sign aninitial trade deal with Chinathis morning.

The producer price index, which is a measure of the prices businesses receive for their goods and services, was up a seasonally adjusted 0.1% in December from a month earlier. Economists had expected prices to increase 0.2%.

The producer price index, excluding the often volatile food and energy categories, was also up 0.1% in December from the prior month when up 0.2% was anticipated.

The New York Federal Reserves Empire State Manufacturing Survey was 4.8, which compares to the estimate of 3.6.

The January Atlanta Federal Reserves Business Inflation Expectations report will be released at 9:00 central time. In December it came in at 1.9%. The Atlanta Fed's Business Inflation Expectations survey provides a monthly measure of the year-ahead outlook for inflation.

The Feds Beige Book will be released at 1:00. This book is produced approximately two weeks before the monetary policy meetings of the Federal Open Market Committee.

In spite of lower prices today, I anticipate U.S. stock index futures will trend higher in January.

CURRENCY FUTURES

The euro currency is higher in spite of news that the German economy grew by 0.6% in 2019, which is the weakest expansion rate since 2013. This report was in line with analysts expectations.

The British pound continues to come under pressure, as it is becoming more likely that the Bank of England will lower its key lending rate this year.

A Bank of England Monetary Policy Committee member said due to sluggish growth in the U.K. economy possible further interest rate cuts would be appropriate.

Two other members of the Monetary Policy Committee have recently voiced support for a dovish stance on monetary policy. The next Bank of England Monetary Policy Committee meeting will take place on January 30.

Also undermining the pound was news that the annual rate of U.K. consumer price inflation fell to 1.3% in December from 1.5% in the prior month and was below a consensus view for a stable inflation rate.

INTEREST RATE MARKET FUTURES

Futures are higher in light of the weaker than estimated U.S. producer price index.

Federal Reserve speakers today are Patrick Harker at 10:00 and Robert Kaplan at 11:00.

There is a 57% probability that the Federal Open Market Committee will lower its fed funds rate at its December 16, 2020 policy meeting. Yesterday the probability was 56%.

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

SUPPORT AND RESISTANCE

March 20S&P 500

Support 3271.00 Resistance 3295.00

March 20 U.S. Dollar Index

Support 96.880 Resistance 97.230

March 20Euro Currency

Support 1.11520 Resistance 1.12080

March 20Japanese Yen

Support .91150 Resistance .91440

March 20Canadian Dollar

Support .76410 Resistance .76660

March 20Australian Dollar

Support .6883 Resistance .6920

March 20 Thirty Year Treasury Bonds

Support 157^20 Resistance 158^30

February 20Gold

Support 1543.0 Resistance 1560.0

March 20 Crude Oil

Support 57.63 Resistance 58.75

March 20Copper

Support 2.8350 Resistance 2.8750

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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