STOCK INDEX FUTURES

The Challenger, Grey & Christmas Inc. job cuts total, on a year-to-year basis, showed an increase of 38.9%, which compares to the prior report that showed a 30.6% increase.

Initial jobless claims in the week ended January 28, were down 12,000 to 367,000, when 371,000 were anticipated and continuing claims in the week ended January 21 were 3.437 million, which compares to the estimate of 3.535 million.

Fourth quarter nonfarm productivity increased .7%, which compares to the estimate of a .8% advance. Unit labor costs advanced 1.2%, when a .8% increase was anticipated. 

At 9:00 central time, Federal Reserve Chairman Bernanke will testify before the House Budget Committee.

CURRENCY FUTURES  

The euro came under pressure after the leader of the euro zone finance ministers, Jean-Claude Juncker, said the measures that were taken at their January 30 summit to resolve the financial crisis were "largely insufficient."

It was just yesterday that there were reports that progress had been made in debt swap negotiations with the private holders of Greek sovereign debt.

The Greek government must secure additional funds from the European Union before March 20, which is when Greece must make a 14.5 billion euro bond payment.

The euro was also hurt by a lukewarm reception to a Spanish debt offering. In addition, Spain's jobless rate increased by 4% in January from December.

Selling in the euro was limited by report that China could come in to buy euro zone sovereign debt. Most analysts dismissed the notion of help from China, since we have heard this before   without results.

The Japanese yen remains near a three-month high against the U.S. dollar, in spite of daily threats from monetary officials in Japan that the Ministry of Finance will intervene against the yen. Japan's finance minister said, "Speculative moves are increasing in the market and we can't overlook them."

The Reserve Bank of Australia will hold a policy meeting on February 7.  Financial markets are currently predicting there is almost a 60% probability that the RBA will reduce their benchmark interest rate by 25 basis points from the current level of 4.25%.

Our analysis indicates the euro zone economy will enter into recession and the value of the euro will decline against the U.S. dollar in the long term.  

INTEREST RATE MARKET FUTURES  

Prices are a little higher due to a slightly worse tone to the financial situation in the euro area.

Futures continue to be supported by the FOMC's recent pledge to keep interest rates low, at last until the end of 2014.

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.

Expect Treasury futures to trade higher from the current lower levels.

For more information on these contracts, I can be reached at 312.242.7911 or via e-mail at alan.bush@archerfinancials.com.

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