US open: Futures resume rise ahead of Fed Quarles, oil inventories

US stocks are set to resume the rise after a brief setback yesterday. The Fed continue to rein in inflation expectations boosting stocks. A light economic calendar leaves Fed speak in focus.

USA (2)

US futures

Dow futures +0.2% at 34389

S&P futures +0.3% at 4201

Nasdaq futures +0.45% at 13721

In Europe

FTSE -0.5% at 7000

Dax -0.25% at 15434

Euro Stoxx -0.2% at 4029

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Stocks resume rise ahead of Fed Speak

US stocks are pointing to a higher start, resuming the recent rally after a mildly lower close on Tuesday.

Data on a Tuesday revealed that Consumer confidence ticked lower in May for the first time in six months. Concerns that rising prices have taken the edge off re-opening euphoria pulled stocks into the red although the Nasdaq closed flat.

The Fed continued to rein in inflation expectations, with move Fed speakers joining the dovish chorus. As fears of an earlier move by the Fed ease, stocks are pushing higher again today. With the core PCE deflator, the Fed’s preferred measure of inflation due at the end of the week, inflation jitters, whilst seemingly under control right now are unlikely to be going anywhere fast. A sharp rise in core PCE could make it more challenging for the Fed to defend the lose monetary policy.

The economic calendar is quiet on both sides of the Atlantic meaning more attention will be on Fed speakers. Federal Reserve Vice Chair Randal Quarles will be watched closely for any commentary regarding inflation or potential tapering.

Equities

Nordstream trades -5% pre-market after missing Q1 earning expectations after the close yesterday.,

Urban Outfitter trades +9% following better than expected earnings.

Looking ahead there are a number of tech stocks reporting today including Snowflake and NVIDIA


Where next for the Dow Jones?

The Dow Jones continues to trade above its ascending trendline support dating back to early April last year. A push above resistance at 34800 is needed in order for the bulls to test 35000 the all time high hit on May 10. However, negative RSI divergence could be forming which suggests upside momentum could be fading and can precede a move lower. It would take a move below strong support at 33650 the 50 day ma, the yearly trendline support and horizontal support to negate the near term uptrend – this could be a tough nut to crack.


FX – USD hovers around 5 month low, NZD jumps post RBNZ announcement

The US Dollar is edging higher after hitting a 5-month low in the previous session. Weaker than forecast consumer confidence and plenty of dovish calls from the Fed are keeping the pressure on the greenback.

NZD/USD is outperforming and trades at a 3 month high after the Reserve Bank of New Zealand kept interest rates unchanged at 0.25% but unexpectedly indicated that rates could rise in September 2022.

NZD/USD + 1% at 0.7305

GBP/USD  +0.1% at 1.4165

EUR/USD    -0.15% at 1.2231

Oil awaits further clarity on Iran, EIA data

Oil is consolidating around $66 as investors grapple with growing optimism surrounding the reopening of Western economies against concerns of increased supply from Iran.

API inventory data showed that oil stocks fell by 439,000 and gasoline inventories declined by 2 million barrels. The data was encouraging but the focus is likely to be on the indirect US – Iran nuclear talks. The market will want more clarity on whether more supply will be flooding back into the market.

Any signs of progress in talks could knock the price of oil as the market questions whether additional supply can be absorbed. Going forward the more demand picks up in economies as they re-open the more comfortable the market would be with additional supply.

EIA inventory data is due shortly

US crude trades -0.2% at $65.88

Brent trades -0.1% at $68.39

Learn more about trading oil here.

The complete guide to trading oil markets

Looking ahead

15:00 Fed Quarles to speak

15:30 EIA crude stock inventory

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