US open: Stocks rally, jobless claims fall, banks beat

US futures

Dow futures +0.83% at 34680

S&P futures +0.98% at 4407

Nasdaq futures +1.15% at 14950

In Europe

FTSE +0.7% at 7195

Dax +1.06% at 15416

Euro Stoxx 0+0.5% at 4075

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Banks rise on earnings beat, initial jobless claims hit fresh post pandemic low

US stocks are on the rise amid an upbeat mood in the market which is overshadowing concerns over supply chains and rising price pressures which could slow the global economic recovery.

Big banks Morgan Stanley and Bank of America are trading higher pre-market on the back of strong earnings as deal making and record levels of M&A boosted fees across the quarter.

Adding to the upbeat mood US initial jobless claims fall to a fresh post pandemic low below 300k to 293k, this was well down from the upwardly revised 329k the previous week and below forecasts of 319k. The data suggests that the recovery in the labour market is continuing, even if the NFP remains relatively weak in comparison.

PPI data rose by more than expected suggesting that the current uplift in CPI still hasn’t topped. However, the market is happy to shrug this off today in a similar fashion to yesterday.

Today’s move higher in equities indices is an extension of gains from the previous session. Yesterday stocks rose and the US Dollar declined despite CPI inflation increasing ahead of forecast to 5.4% and the Fed indicating that it will start tapering bond purchases. The market really appears to be buying back into the central bank’s expectation that the rise in inflation will be transitory. Furthermore, the Fed indicating that it will start tapering removes an element of the unknown from the market; we all know how much the market hates unknowns.  The market has spent the past few months obsessing over the timing of the Fed’s taper. Now it is pretty much out in the open sentiment can move forward.

 

Where next for the Dow Jones?

The Dow Jones has experienced choppy trade across recent sessions. The rebound off 33500 on October 1^st, failed at the 50 sma, dropping lower to yesterday’s low point of 34100. Today the price is on the rise again, pushing over the 20 sma at 34400 and heading back toward the 50 sma at 34890. A close above here could cement a bullish bias with 35000 a key level ahead of 35500. A move below the 20 sma could see 34120 tested drawing 33500 back into focus.

FX – USD lower, GBP rises on 

The US Dollar is extending losses from yesterday in what appears to be a buy the rumor sell the fact trade following the higher than forecast CPI read and the FOMC minutes which point to tapering this year.

GBPUSD is extending gains amid Brexit optimism and expectations that the BoE could move to hike rates as soon as this year. The CME BoE watch tool indicates that a 72% probability of a rate hike in December is now priced in.

Oil resumes advance

After a slight dip lower in the previous session, oil prices are resuming the uptrend. The International Energy Agency raised its demand growth forecast for 2021 & 2022 saying that record natural gas prices will boost demand for oil.  Oil demand is expected to rise by 500,000 barrels a day as industries switch away from more expensive sources of power, such as gas and towards oil.

Separately the API stockpile report revealed a rise in crude stockpile but a larger than forecast draw on gasoline inventories. The EIA stockpile report is due shortly.

WTI crude trades -0.8% at $79.43

Brent trades -0.8% at $82.38

Learn more about trading oil here.

 

Looking ahead

15:30 EIA crude oil inventories

17:00 Fed Williams Speech