US open: Wall Street set to extend gains as Fed, China calm inflation fears

US stock are set for further gains as inflation fears ebb. More soothing words from the Fed and China kicks commodity prices lower.

USA (2)

US futures

Dow futures +0.2% at 34468

S&P futures +0.24% at 4208

Nasdaq futures +0.45% at 13702

In Europe

FTSE -0.1% at 7046

Dax -0.35% at 15518

Euro Stoxx +0.02% at 4069

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Tech stocks lead the risers again as inflation fears recede

US stocks point higher with fresh all time highs in sight amid continued optimism surrounding the economy re-opening and as inflation fears continue to ease.

The Fed

Calming words from the Fed on inflation, coupled with reassurance that the central bank will keep monetary stimulus in place during the covid pandemic is boosting risk appetite. The prospect of low rates for longer is particularly supportive of high growth tech stocks. The tech heavy Nasdaq outperformed in the previous session and looks set for a repeat performance today.

China & commodities

Reining in inflation fears is not all about the Fed. China is playing its role too by adopting zero tolerance for excessive speculation in commodities. Persistently rising commodity prices have added to the market’s runaway inflation fears. Seeing the price of commodities, such as base metals decline has helped ease those fears and boost risk appetite.

Covid cases

The vaccine rollout in the US is successfully slowing the spread of covid. America recorded its lowest number of daily covid cases in almost a year.

Equities

Companies reporting today include Nordstrom, Toll Brothers and Urban Outfitters.

Amazon is also likely to be under the spotlight amid reports that it is close to agreeing a deal to buy Hoollywood’s MGM Studios for $8.5-$9 billion. The deal comes as Amazon completes with other streaming services such as Netflix and Disney. This would mark its biggest acquisition since Whole Foods which it bought for £13.7 billion in 2017.


Where next for the S&P 500?

The S&P 500 continues to build on gains for a third straight session, cementing the move higher above the near term descending trendline dating back to the all time high of 4250. The RSI remains in bullish territory. Really there is very little o n the chart to suggest anything but further upside. Resistance at 4210 is being tested, a move beyond here will see the all time high back in focus. It would take a move below 4100 the 50 day ma to see the uptrend negated.


FX – USD weakens, EUR rises on strong German IFO data

The US Dollar is trading lower as concerns continue to fade over inflation and the Fed acting sooner to tighten policy. More calming Fed chat overnight has helped to drive the message home that the Fed isn’t looking to move on rates.

EUR/USD trades higher after mixed data from Germany. German GDP Q1 the final revision was downwardly revised to -1.8% QoQ, down from -1.7%. However, the IFO business sentiment index jumped to a 2 year high of 99.2 as the vaccine rollout accelerates and optimism over Germany’s economic outlook rises.

GBP/USD  +0.06% at 1.4165

EUR/USD  +0.3% at 1.2256


Oil pauses after almost 4% gains yesterday

Oil bulls are pausing for breath after an almost 4% run up in the previous session. Questions over whether Iranian oil would be making its way back to the market, in addition to rising risk appetite and optimism surrounding a strong driving season in the US helped to boost prices.

Progress to revive the 2015 Iran nuclear deal appeared to stall on Monday as Iran stopped surveillance of its nuclear sites. An extension to the UN watchdog has now been granted meaning indirect US – Iran talks could continue. Even so, oil has held on the majority of yesterday’s gains.

US crude trades -0.6% at $65.58

Brent trades -1.42% at $68.05

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Looking ahead

14:00 US House Price Index

15:00 US Consumer Confidence

15:00 US New Home Sales

21:30 API Crude Oil Stock Change

 


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