US open: Futures fall ahead of Fed minutes

US futures

Dow futures -0.75 % at 34390

S&P futures -1% at 4480

Nasdaq futures -1.64% at 14582

In Europe

FTSE -043% at 7560

Dax -2% at 14100

Euro Stoxx  -2.34% at 3828

Fed fears hit stocks

US stocks are heading for a weaker open, extending losses from the previous session, ahead of the FOMC minutes.

Wall Street closed lower yesterday and remains under pressure today amid rising expectations of a more hawkish Federal Reserve. Fed Governor Brainard hinted at larger interest rate hikes and a rapid runoff on the balance sheet in order to rein in surging inflation.

According to the CME Fed Funds, the market is pricing in a 76.6% probability of a 50 basis point rate hike in May. The market expects rates to be hiked by 225 basis points by the end of the year.

High growth tech lagged yesterday, with the NASDAQ100 underperforming its major peers, shedding over 2.2%. The NASDAQ is set to underperform again today.

Attention is now turning to the release of the minutes from the March Fed meeting. This was the meeting when the Fed raised interest rates for the first time since 2018 and could offer further clues as to the future path of interest rate hikes and the speed at which the balance sheet will be reduced.

Separately, Russia headlines remain in focus and are driving oil prices higher. New sanctions are being applied to Russia for the war crimes that are being committed in by Russian forces in Ukraine.

In corporate news:

JetBlue Airways announced that it had made an unsolicited $3.6 billion bid to Spirit Airlines to create stronger competition for the four major US airlines.

Where next for the S&P500?

After rebounding from 4140, the March 15 low, the S&P500 run into resistance at 4630 and has been edging lower since. The price falling below the 100 SMA and the bearish crossover on the MACD keep sellers hopeful of further downside. Support can be seen at 4425, the 50 SMA, and March 3 high. A break below here could open the door to 4345, the March 11 high and March 17 low. On the flip side, any recovery would need to rise above the 100 SMA at 4535 in order to look towards 4630, the March high.

FX markets USD steadies, GBP rises

USD is edging higher for a fifth straight session and trades close to its two-year high. The USD is being boosted by expectations of a more hawkish Fed ahead of the FOMC minutes & after Leal Brainard’s hawkish comments.

EUR/USD is holding steady despite surging eurozone wholesale inflation. PPI rose to 31.4% YoY in February, up from 30.6% in January. Separately, Germany’s factory orders fell by more than expected -2.2% MoM in February after rising 2.3% in January.

GBP/USD is edging higher after data showed that activity in the UK construction sector remained strong in March despite rising prices. The UK construction PMI was 59.1 in Mach, in line with February’s.  

GBP/USD  +0.01% at 1.3079

EUR/USD  +0.01% at 1.0915

Oil rises cautiously higher

Oil prices are rising after booking mild losses in the previous session as concerns over new sanctions on Russia fueled supply fears, overshadowing the stronger dollar and demand concerns.

The latest sanctions on Russia include the banning of Russian ships in European ports and the banning of Russian coal. Oil and gas are not included; however, the prospect of retaliation from Moscow has ramped up.

Gains in oil are being limited by the extended lockdown in Shanghai, which now covers the entire 26 million inhabitants.

WTI crude trades +1.2% at $102.50

Brent trades +0.8% at $107.17

Looking ahead

15:00 Canadian Ivey PMI

15:30 EIA crude oil stockpiles

19:00 FOMC minutes