U.S.-China Trade Talks Optimism Lifts Stock Index Futures

March 15, 2019

STOCK INDEX FUTURES

Stock index futures advanced on renewed U.S.-China trade hopes.

The Xinhua news agency reported Chinese Vice Premier Liu He spoke by telephone with U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer, with the two sides making substantive progress on trade negotiations.

The New York Federal Reserves Empire State Business Conditions index fell to 3.7 in March from 8.8 in the prior month. This is the lowest level in almost two years. Economists had expected a reading of 10. Any reading above zero indicates improving conditions.

February industrial production increased .1% when analysts predicted a .4% gain and February capacity utilization was 78.2% when 78.5% was anticipated.

The 9:00 central time March consumer sentiment index is estimated to be 95.5 and the 9:00 January Job Openings and Labor Turnover Survey (JOLTS) is expected to be 7.2 million.

Since the lows were made in late December, stock index futures have been performing better than the news would suggest, which should be viewed as a sign of long term strength.

CURRENCY FUTURES

The U.S. dollar is lower on the belief that the Federal Open Market Committee may be moving toward accommodation this year.

TheJapanese yen is firm in spite of news that the Bank of Japan kept monetary policysteady, but tempered its optimism that better exports and factory output willunderpin economic growth. The BoJ's policy board decided to maintain short term interest rates at minus 0.1% and its target for 10 year Japanese government bond yields at close to zero.

The Bank of Japan is widely considered to be the most dovish of the major central banks. With little momentum in the Japanese economy an end to its ultra-easy monetary policies doesnt seem likely any time soon.

The Canadian dollar is lower in spite of news that Canadian manufacturing sales rose at a faster rate than expected in January. Factory sales increased 1.0% in January from the previous month. Market expectations were for a 0.4% rise.

The Australian dollar is higher afterBeijing said it can use reserve requirements and interest rates to supportgrowth. The outlook for the currency of Australia is heavily correlated with the outlook for the Chinese economy.

INTEREST RATE MARKET FUTURES

Financial futures markets are predicting a 75% probability that the fed funds rate will remain unchanged at the current level of 2.25%-2.50% this year. There is a 25% chance for a 25 basis point decline in 2019 and virtually no chance of a rate increase.

Currently, futures are caught between the bullish influence of a weakening global economy and overseas central bank accommodation and the bearish influence of optimism for a U.S.-China trade agreement.

A U.S.-China trade deal, or strong hint of one, would be a catalyst to take futures lower.

SUPPORT AND RESISTANCE

June 19S&P 500

Support 2809.00 Resistance 2828.00

June 19 U.S. Dollar Index

Support 95.950 Resistance 96.310

June 19Euro Currency

Support 1.13810 Resistance 1.14240

June 19Japanese Yen

Support .90000 Resistance .90440

June 19Canadian Dollar

Support .74880 Resistance .75500

June 19Australian Dollar

Support .7065 Resistance .7116

June 19 Thirty Year Treasury Bonds

Support 145^12 Resistance 146^12

April 19Gold

Support 1291.0 Resistance 1308.0

May 19Copper

Support 2.8800 Resistance 2.9400

April 19 Crude Oil

Support 57.55 Resistance 59.13

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