US open: Indices mixed ahead of Fed

Fiona Cincotta
By :  ,  Market Analyst

US futures

Dow futures -0.1% at 34264

S&P futures -0.05% at 4250

Nasdaq futures +0.1% at 14050

In Europe

FTSE +0.04% at 7173

Dax -0.2% at 15697

Euro Stoxx +0.1% at 4149 

All eyes on the Fed for fresh direction

US equities are treading water as investors wait on the sidelines ahead of the Federal Reserve monetary policy announcement. The Fed is not expected to adjust policy but it could give some clues as to the next steps. This is one of the most keenly awaited Fed meetings this year and could be pivotal to market sentiment.

The meeting comes after date in the previous session revealed that retail sales fell by more than expected in May and PPI wholesale inflation topped forecasts.

More broadly, the meeting is being held against a backdrop of surging inflation, rebounding growth, but a softer recovery in the labour market. Whether the Fed decides to start introducing talk towards tapering is a coin toss right now. Should the Fed continue singing unwaveringly from the dovish hymn sheet then the S&P500 could surge to fresh all time highs. Any clues of a move towards tightening could see stocks come off. But they are at all time highs so may this makes it good timing?

Equities

Oracle trades -5% pre-market. The database management firm says that it expects current quarter profits to be below forecasts as it invests heavily in its cloud business to take on the big industry players.

Roblox trades -8% after reporting a 1% fall in daily active users in May to 43 million. That’s still up 28% from last year!


Where next for the S&P?

The S&P struck a fresh all time high in the previous session as it continuers to grind higher. The ascending trendline dating back to early November keeps the uptrend dominant, as does the S&P500 trading above its 50 & 100 sma. However, the RSI is showing bearish divergence so momentum is slowing and move downward could be on the cards. Immediate support is at 4220 a move below here could negate the near term uptrend. It would take a move below 4170 the June low for sellers to gain traction.


FX – USD steady, GBP jumps as CPI tops BoE’s 2% target

The US Dollar holding steady for a second straight session as investors look ahead to the Fed monetary policy announcement later today. Any hints that the Fed is preparing to start talking about reining in monetary policy could boost the USD. A continuation of the unwavering dovish stance could send the greenback aggressively lower.

GBP/USD is outperforming its major peers after a surprise jump in UK inflation. UK CPI unexpectedly surged 0.6% MoM in May, up from 0.3% in April and double the 0.3% forecast. CPI YoY jumped to 2.1%, up from 1.5% and ahead of the 1.8% forecast. This means inflation is now over the BoE’s 2% target and therefore raises the prospect of the central bank starting to tighten monetary policy.

GBP/USD +0.2% at 1.4116

EUR/USD -0.1% at 1.2118


Oil jumps to fresh multi year highs

Oil prices are extending gains. Brent is on the rise for a fifth straight session and looks towards $75 whilst WTI crude oil is trading comfortably above $70. The price of oil continues to be supported by rising demand expectations amid successful vaccination rollouts and economies reopening.

API oil inventory data added to the upbeat mood in the market. Inventories declined by -8.5 million barrels. Attention will now turn to EIA crude oil stock data due shortly.

US crude trades +0.4% at $72.18

Brent trades +0.57% at $73.90

Learn more about trading oil here.

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Looking ahead

15:30 EIA Crude Oil Stock Change

19:00 Federal Reserve Rate Announcement

19:30 Federal Reserve Press Conference

 

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