US open: Stocks rise as recession fears are pushed aside for now

US futures

Dow futures +0.73% at 30900

S&P futures +0.85% at 3825

Nasdaq futures +0.87% at 11796

In Europe

FTSE +1.5% at 7137

Dax +0.7% at 13035

Euro Stoxx +1.5% at 3491

New home sales, consumer confidence due

US stocks are set to rise after solid gains in the previous session after Powell wrapped up his appearance in Congress and ahead of today’s consumer confidence data.

The leading indices appear set to book gains across the week after three weeks of declines.

Federal Reserve President Powell was clear that the Fed is committed to bringing down soaring inflation, even if it means pushing the US into recession and lifting unemployment.

Risk sentiment has undoubtedly improved over the past two days, even if the data hasn’t. Yesterday the composite PMI fell to 51.2, down from 53.8, highlighting the slowdown in business activity and the likelihood of a recession.

Recession fears have perhaps been best played out in the commodity sector, which has seen base metal, and oil trends lower across the week on demand concerns.

Today’s attention is now turning to US new home sales, which are expected to show that the housing market continues to cool as mortgage rates rise and affordability challenges grow.

Looking out later in the session, US Michigan consumer confidence will be under the spotlight after falling to a record low preliminary reading of 52 in June.

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In corporate news:

FedEx is on the rise after the delivery giant reported upbeat quarterly earnings and better-than-expected guidance.

Netflix is also rising pre-market after announcing that it will cut 300 jobs, equating to around 4% of the workforce.

Where next for the Nasdaq?

The Nasdaq is extending its rebound off the 2022 low of 11035, taking out resistance at 11500 and 11700, the May 11 low. This, combined with the bullish crossover on the MACD, keeps buyers hopeful of further upside. Buyers will look for a move over 12065, the falling trendline support, and the 50 sma at 12477. A rise over 12900 could see buyers gain traction.

FX markets – USD steady, markets quiet.

USD is holding steady after mild gains in the previous session, although the USD is set to decline across the week. Concerns of a recession in the US have seen bond yields ease, pulling the USD lower.

EURUSD is holding steady despite German IFO business sentiment falling further in May. Concerns over gas security in some European countries, including German, could also be weighing on demand for the euro. Meanwhile, the stronger equity market is supporting the pair.

GBP/USD is holding steady in quiet trade despite retail sales falling in May. Sales declined -0.5% MoM, after a downwardly revised 0.4% rise in April. The slide in sales, particularly supermarket sales suggests that consumer are changing their shopping habits as inflation rises.

GBP/USD  +0.18% at 1.2267

EUR/USD  +0.47% at 1.0557

Oil rises but sees losses across the week

Oil prices are rising today as tight supply concerns are in focus ahead of the OPEC meeting next week. However, across the week, oil prices are set to decline for a second straight week.

Fears over a recession in the US have raised concerns over the demand outlook and driven prices lower. They are pulling oil off by 10% in just two weeks.

Supply concerns are in focus as OPEC member Libya is experiencing an almost complete shutdown of output due to unrest in the country.

OPEC will meet next week and is expected to stick with the higher output agreed at the start of the month. Of course, given Libya’s position, compliance with output quotas is questionable.

WTI crude trades +0.8% at $109.56

Brent trades +0.8% at $113.22

Looking ahead

15:00 US new home sales

15:00 Michigan consumer confidence

18:00 Baker Hughes rig count

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