STOCK INDEX FUTURES
Prices are higher as Greece continued efforts to reach a political agreement for new austerity measures in order to receive the second round of bailout funds.
The Mortgage Bankers Association reported mortgage applications in the week ended February 3 were up 7.5%, which compares to the 2.9% decline in the previous week.
According to a Bloomberg report, approximately 68% of the 287 corporations in the S&P 500 that have reported earnings since January 9 have beat analysts' estimates.
Strength in stock index futures persists in spite of growing concerns that growth in the world economy is slowing. One piece of evidence supporting this view is a report from the "China Securities Journal," which said China's electricity consumption in January fell by 7.5%. This is an indication that industrial production in China may have slowed sharply in January.
CURRENCY FUTURES
The euro is a little higher on optimism that Greece is making progress in their efforts to reach an agreement that would allow it to receive additional bailout funds. There are reports that Greek Prime Minister Papademos had constructive talks with the managing director of the International Institute of Finance, who is negotiating the terms of the Greek debt swap deal.
There are reports that a new deadline for a Greek debt swap accord is February 13, which would allow the minimum amount of time for all the necessary procedures to be finalized before March 20. March 20 is when Greece must make a 14.5 billion euro bond payment.
The euro is higher even though a report showed German exports in December recorded their steepest decline in almost three years.
The Swiss franc fell after it was reported that Swiss unemployment in January hit a 10-month high at 3.4%.
The Japanese yen is little lower due to almost daily threats of intervention from the Bank of Japan. Yesterday the BOJ said they would not rule out more intervention against the yen.
The Canadian dollar is a little higher in spite of a report that showed Canadian housing starts declined 1% in January from December.
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
The Treasury is auctioning $72 billion of debt this week. Today the Treasury will offer $24 billion of 10-year notes and tomorrow they will sell $16 billion of 30-year bonds. Yesterday's auction of $32 billion of three-year notes was met with average to slightly weaker than anticipated demand.
In the longer term, Treasury futures are going to be supported by a variety of flight to quality influences, including the continuing tensions in the Middle East, 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 additional market information, I can be reached at 312.242.7911 or via e-mail at alan.bush@archerfinancials.com.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright © ADM Investor Services, Inc.
