US open: Stocks rise ahead of ISM services data

US futures

Dow futures +0.42% at 31510

S&P futures +0.4% at 3948

Nasdaq futures +0.43% at 12167

In Europe

FTSE +0.34% at 73283

Dax +0.2% at 12960

Euro Stoxx -1.7% at 3670

A positive start after weeks of losses

US stocks are set to open higher after the Labor Day long weekend. The upbeat mood is well needed after three straight weeks of declines.

Stocks have been under pressure over the last month as Jerome Powell and Fed adopted a more hawkish stance, warning that the Fed will hike rates and keep them elevated to stamp out inflation.

The Federal Reserve is due to meet again later this month, and the market is pricing in a 68% probability of a 75 basis point rate hike; this is down slightly from 74% last week, following the non-farm payroll report.

While the NFP saw 315k jobs added, it also saw the participation rate rise, which should help ease the very tight labor market bringing wage growth down.

Looking ahead, attention will be on the release of the ISM non-manufacturing PMI data, which is expected to show a slight slowdown in growth to 55.5 from 56.7 in July. A strong report would be in contrast to the S&P Global US

Corporate news:

CVS rises pre-market after agreeing to buy Signify Health for $8 billion in cash. This will enable one of the largest healthcare companies to provide healthcare in patients’ homes.

FX markets – USD rises, EUR falls

The USD is rising, tracking treasury yields higher. The USD rallied to a 2-year high in the previous session and is holding those gains ahead of the US data shortly.

EUR/USD is edging lower after German factory orders fell by more than expected in July, dropping -1.1%, after falling -0.4% in the previous month. This marked the 6^th straight month that industrial orders declined. Concerns over energy security continued to weigh on the EUR.

GBP/USD has rebounded from yesterday’s 2.5-year low, boosted by reports of an energy bailout. The new PM Liz Truss drafts a £130 billion plan to freeze energy prices for 18 months and drafts a £40 billion energy support plan for businesses. These supportive measures could enable the BoE to hike rates more aggressively, which is lifting the pound.

GBP/USD  +0.5% at 1.1575

EUR/USD  -0.04% at 0.9923

Oil falls on demand concerns

Oil is falling, snapping a three-day winning run. Oil heads back towards August lows as demand fears return, overshadowing concerns over the surprising supply cut from OPEC+ in the previous session.

New COVID lockdowns in China add to rising concerns over high inflation and more aggressive rate hikes in Europe and the US.

Yesterday OPEC+ cut output by 100k bpd, reversing the decision to raise output by the same amount in September.

WTI crude trades -2.6% at $86.96

Brent trades -2.3% at $92.70

Looking ahead

14:45 US services PMI

15:00 US ISM services PMI