STOCK INDEX FUTURES
U.S. stock index futures are higher after China’s central bank said Monday that it would lower the amount of funds banks have to set aside as reserves, adding liquidity to the financial system and cutting financing costs for businesses in an effort to support the economy.
The People’s Bank of China announced it will cut the reserve requirement ratio for most domestic financial institutions by 50 basis points, effective December 15.
The short-term outlook is subject to variant news. However, the long-term fundamentals remain bullish on balance for stock index futures.
CURRENCY FUTURES
The euro currency declined on news that German manufacturing orders fell in October, missing expectations of an increase due to continuing supply-chain disruptions. Manufacturing orders declined 6.9% on the month in October when economists had expected orders to increase 0.5%. Orders of intermediate goods fell 2.7% on the month, and capital goods orders decreased 10.7%.
The British pound remains close to a 2021 low hit last week, due to expectations the central bank will be holding interest rates at record-low levels at its December 16 meeting. Bank of England policymaker Michael Saunders, who voted for an interest rate hike last month, said he wanted more information about the impact of the Omicron coronavirus variant before deciding on how to vote next week.
The Confederation of British Industry cut its economic growth forecasts for this year and for 2022 due to global supply chain problems.
INTEREST RATE MARKET FUTURES
The yield curve has flattened recently, with yields on shorter-dated issues rising and yields on longer-dated issues ticking down, which is an indication of a slowing economy.
Federal Reserve Chair Jerome Powell recently indicated the Fed will discuss speeding up the tapering of its bond-buying program at the central bank’s next meeting on December 15.
If the U.S. economy weakens it may be difficult for the Fed to justify an accelerated taper of its asset-purchase program, especially now that other central banks are adding more accommodation or delaying the partial removal of easy monetary policies.
The longer-term trend for the 30-year Treasury bond futures is higher.
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