US open: Stocks rise on China hope

Stocks are set to open modestly higher as the market mood improves. Beijing pledging to increase vaccinations is a first step to removing zero-Covid restrictions.

USA (2)

US futures

Dow futures +0.07% at 33790

S&P futures +0.03% at 3963

Nasdaq futures +0.13% at 11608

In Europe

FTSE +0.5% at 7529

Dax -0.2% at 14390 

Beijing pledges more vaccines

US stocks are set for a stronger start amid rising speculation that the unrest in China from Covid restrictions would force authorities to move faster to loosen curbs. Beijing didn’t announce any major changes to the current measures by did say that it would speed up the pace of vaccinations among senior citizens. This could be considered a crucial step toward ending strict lockdown rules.

The change in mood comes after widespread unrest in China yesterday in response to strict unsustainable Covid restrictions. China is at a critical juncture for its policy.

In addition to China, stocks are benefitting from optimism that the Federal Reserve could slow the pace of rate hikes as from the December meeting. Federal Reserve speakers yesterday sent mixed messages. NY Fed President John Williams suggested that there is still work to be done to tame inflation, but there could be a cut next year.  James Bullard and Vice Lael Brainard also flagged the amount of work still to be done. The hawkish chatter could be a prelude to Federal Reserve Chair Jerome Powell’s speech tomorrow.

Adding to the upbeat mood, initial data from Adobe Analytics showed a record-breaking Cyber Monday as US spending tops $11.6 billion. This was an 8.5% rise over 2021 when interest rates were still low. This may well be the last hooray for retailers, as strong spending suggests that investors were keen to snap up a deal amid high inflation and rising interest rates.

Looking ahead, attention will turn to US consumer confidence data which is expected to show that morale slowed slightly to 100, from 102.5.

Corporate news:

Apple is rebounding on China optimism after losses yesterday amid the unrest at the Foxconn plant.

UPS jumps 1.4% pre-market after Deutsche Bank upgrades its stance to buy from hold, saying that macro concerns are now priced into the stock.

Where next for the Nasdaq?

The Nasdaq is consolidating, caught between the 100 sma, which is capping gains, and the 50 sma, limiting losses. The RSI is approaching neutral. A breakout trade could be considered. Buyers will look for a rise over the 100 sma at 12030 to bring 12900, the September high, into focus. Sellers could look for a move below 11380, the 50 sma, to open the door to 10600, the November low.

nasdaq2911fx

FX markets – USD falls, EUR rises

The USD is falling as the market mood improves and investors digest Fed officials' latest commentary. Attention is now turning toward Jerome Powell’s speech tomorrow.

EURUSD is rising after stronger-than-expected economic sentiment data and after German inflation cooled to 11.3%, down from the record high of 11.6% in October. The data comes after ECB President Lagarde warned that inflation in the region could still push higher. Her comments fueled bets of more interest rate hikes.

GBP/USD is holding over 1.20 but trades off its daily high after disappointing data. UK mortgage approvals fell sharply to 58.9k, the lowest level since June 2020, as interest rates rise. BoE’s Andrew Bailey is due to speak later.

GBP/USD +0.3% at 1.12

EUR/USD +0.05% at 1.0330

Oil rebounds

Volatility in oil prices continues on Tuesday. After touching a new year-to-date low yesterday, oil prices have rounded, trading some 3% higher on optimism that China could soon ease its zero-Covid measures.

The prospect of a return to normality in China, the world’s largest oil importer, is good news for the demand outlook and has fueled the first decent rebound in oil prices in over two weeks.

Also supporting the oil price is speculation that OPEC+ could cut production further to support the price of oil. The oil cartel cut production in October, and the price now trades below where it was at that meeting.

WTI crude trades +2.03% at $78.80

Brent trades at +2.3% at $85.12 

Looking ahead

15:00 US consumer confidence

21:30 API crude oil stockpiles

 

 

 

 

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account