US open: Futures mixed ahead of Fed decision

The Fed isn't expected to move on rates or bond purchases - this meeting will be all about guidance. Will yields pick up? Tech stocks seem to think so.

USA (1)

US futures

Dow  futures +0.1% at 32761

S&P futures -0.3% 3938

Nasdaq futures -1.1%% at 13184

In Europe

FTSE -0.5% at 6769

Dax -0.01% at 14557

Euro Stoxx -0.2% at 3841

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Fed set to upgrade GDP & inflation forecasts

The Federal Reserve is due to announce its monetary policy decision at 18:00 UTC. This is the first FOMC since inflation expectations started moving sharply higher. No change in monetary policy is expected.

Therefore, the Fed’s guidance and the dot plot will be the key focus. The Fed is expected to upwardly revise growth and inflation forecasts. Meanwhile the dot plot indicates no hikes are expected until 2024.  The recent jump in treasury yields, particularly the benchmark 10 year yield points to the market expecting an earlier move by the Fed.

Fed Powell will need to find a balance between sounding upbeat over the vaccine & stimulus inspired growth without heightening inflation expectations and raising bets of an earlier move by the Fed.

Should the Fed sound too upbeat, yields could rise, lifting the US Dollar and dragging stocks, particularly growth stocks lower.

My colleague Matthew Weller looks in more detail at what to expect from the Fed here

Stocks set for a mixed start, tech under pressure

After rallying 1.6% over the past two session, the tech heavy Nasdaq is pointing to a weaker start. Futures point to a 1% decline ahead of the Fed’s decision. Tech stocks have come under pressure in recent weeks when inflation expectations have risen. The US 10 year yield trades +2.4% at 1.66% once again pulling into focus valuations of growth stocks.

Stocks in focus

UBER -trades -2.5% lower pre-market after giving up its fight in the UK courts to not classify its drivers as workers. Uber is unlikely to absorb the costs associated with paying the minimum wage and benefits – meaning more expensive journeys.

Tesla – trades -3.2% lower pre-market amid growing concerns of rising competition, rising interest rates and its lofty valuation. Yesterday Volkswagen, which owns Porsche, Audi & Bentley said its aims to make 1 million EV’s this year.

FX – EUR/USD struggles at 1.19

EUR/USD – is struggling to hold onto 1.19 ahead of the FOMC. The Euro has been under pressure in recent sessions amid a sluggish vaccine rollout, escalating AstraZeneca vaccine row and rising covid cases in the region. Eurozone inflation data came in line with expectations CPI for February MoM +0.2%. Core CPI YoY 1.1% down from 1.4% in January.

GBP/USD +0.08% at 1.3897

EUR/USD  trades -0.05% at 1.1893

Fiona Cincotta looks at more detail GBP/USD price movements and levels to watch here

Oil EIA data & the Fed to decide oil’s next move

Oil head lower for a fourth straight session as investors look ahead to the latest stockpile data and to the FOMC decision late.

Yesterday’s API report showed a surprise draw in crude inventories of 1.05 million barrels against expectations of a 2.7 million barrel build. The data suggests that demand is rising faster than expected following last months’ cold snap.

Attention will now turn to EIA stockpile data due later today. Expectations are for a more modest build after last week’s eye watering 13.8 million increase. A large fall in stockpiles could boost oil prices. The EIA warned that global demand won’t return to pre-pandemic levels until 2023.

Later the Fed could be responsible for further moves in oil. The dollar denominated commodity is negative correlated to the USD. Too much optimism from the Fed and oil prices could swing lower.

US crude trades -0.7% at $64.33

Brent trades -0.9% at $67.77

Learn more about trading oil here.

The complete guide to trading oil markets

Looking ahead

15:30 EIA Crude Oil Stock Change

18:00 Fed’s Rate Decision & Statement

18:30 Fed’s Press Conference

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