US open: Stocks pick up from monthly low, USD eases off two month high

Stocks look set to rebound after heavy losses in the previous week after a surprise hawkish shift from the Fed. Fed speaker Williams will be in focus amid a quiet economic calendar.

USA (2)

US futures

Dow futures +0.5% at 33476

S&P futures +0.3% at 4179

Nasdaq futures +0.1% at 14070

In Europe

FTSE +0.3% at 7030

Dax +0.8% at 15555

Euro Stoxx +0.5% at 4104

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Dow to outperform after 3.5% decline last week

US stocks are pointing to a sharply lower start, with the Dow underperforming its Wall Street peers for a stocks are set to rebound on Monday after a hefty week of losses last with. With all three major indices on Wall Street heading higher, the Fed inspired sell off looks like it was overdone.

The Fed’s sudden hawkish shift last week, with two interest rate hikes now expected in 2023 caught the market off guard.

The Dow was the hardest hit last week by a significant margin, and that is the index which is rebound the most today.

Inflation and the Fed’s next moves will remain very much in focus again this week with Fed Chair Jerome Powell due to appear before Congress tomorrow and with PCE data on Friday.

Today the economic calendar is very light. Attention will be firmly on Fed Williams who is due to speak later.

Equities

Amazon is likely to be under the spotlight on Amazon Prime Day. The two day sales event generated $10.4 billion in sales for the e-commerce giant last year.

Where next for the Dow Jones?

The Dow broke through its ascending trend line support dating back to 2020’s mid-March lows for the first time last week. The Dow futures extended the sell off this morning briewfly falling below the 100 dma at 33200 to a low of 33030. The price has since picked up retaking the 100 DMA, taking the RSI out of oversold territory. Any meaningful recovery would need to break above 33750, a level which offered support in the second half of April. A move above 34150 the ascending trendline and the 50 dma could see the buyers target a fresh all time high. On the downside a close below the 100 dma and today’s low of 33030 could suggest more losses are coming, with sellers target 32000.

FX – USD eases, GBP rebounds ahead of Thursday’s BoE rate decision

The US Dollar is trading lower, but held on to the majority of gains following last week’s hawkish surprise from the Fed. The US Dollar index surged 1.9% last week its biggest weekly gain since March 2020.

GBP/USD is rebounding firmly, outperforming its major peers as investors look ahead to the BoE rate decision later in the week. Whilst some of cable’s gains are owing to the weaker US Dollar, part of the gains are also attributed to a more hawkish tilt from the BoE on Thursday, particularly in light of inflation running above the 2% target.

GBP/USD +0.6% at 1.3885

EUR/USD +0.2% at 1.1887


Oil hovers around multi-year highs awaiting next catalyst

Oil prices are treading water at the start of the week after booking yet another week of gains last week. Both oil benchmarks booked the fourth straight week of gains last week. Optimism surrounding higher demand as economies reopen and a strong driving season keep oil bulls optimistic.

Meanwhile, concerns over Iranian oil flooding back into the market have eased further following the Presidential elections in Iran. The election of a hardline judge Ebrahim Raisi, who is already under US sanctions could put the brakes on any nuclear deal being agreed.

Trading is relatively quiet, the oil markets appear to be awaiting the next catalyst.

US crude trades +0.06% at $71.39

Brent trades -0.07% at $72.91

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Looking ahead

15:00 ECB Lagarde to speak

22:00 Fed’s Williams to speak


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