Dow futures +0.22% at 30219
S&P futures +0.11% at 3792
Nasdaq futures +0.01% at 11635
FTSE +0.05% at 7234
Dax -0.6% at 12690
Euro Stoxx -0.5% at 3472
Investors continue digesting the Fed meeting
US stocks are heading cautiously higher after a steep selloff in the previous session and as investors continue to digest the latest Fed move.
The US central bank hiked rates by 75 basis points, as expected, taking the rate to 2.25% as expected. The Fed also hammered home the hawkish message, which Powell said hadn’t changed since Jackson Hole.
The market is now pricing in a 75-basis point hike in November, followed by another at least 50 basis point hike in December. The message is starting to hit home that the Fed is going to take rates much higher and is going to keep them there. This will keep stocks out of favour whilst lifting the USD higher. It will take a persistent fall in inflation for the Fed to change its position.
US jobless claims ticked up to 213k, from 208k, but the broader trend shows that initial claims are falling. The data suggest that the labour market continues to tighten, which is supports the Fed’s more hawkish tone.
Other central banks across the globe have also been busy hiking rates, including the BoE, SNB and the Riksbank. The hikes show just how universal the struggle against high inflation is.
Lennar falls pre-market after the homebuilder reported better than expected Q3, lifted by record high prices. However, new sales disappointed.
Nike rose 0.7% after RBC initiated coverage on the retailer to outperform saying that it expects the share price to surge 30%. Nike will report earnings next week.
Where next for the S&P500?
The S&P500 fell below the multi-month rising trend line support and have taken out support at 3800. The RSI supports further downside. Sellers will need to break below 3750, the daily low, to extend the bearish trend towards 3720, the July 14 low. Buyers will look for a rise over 3800 as starting point ahead of 3915 the rising trend line resistance.
FX markets – USD slips, JPY strengthens
The USD is easing lower after rising to a fresh 20-year high following the Fed’s rate hike and hawkish outlook. Better than expected US jobless claims support the Fed’s hawkish outlook.
Meanwhile, the USD/JPY is falling sharply after Japan intervenes in the FX market following the BoJ meeting, which saw the central bank stick stubbornly with its ultra-lose policy.
EUR/USD, after steep losses yesterday and touching a new year low of 0.9809 earlier today, the pair is rebounding. Investors continue to digest the Fed’s move along with Putin’s threats yesterday, which could limit gains in the common currency. Eurozone consumer confidence data is due later and is expected show that sentiment deteriorate further in September.
GBP/USD is holding gains after the BoE hiked interest rates by 50 basis points, less than the 75 basis points hoped for. The benchmark lending rate is 2.25%. While the pound is holding gains today, make no mistake, it is still trading at the lowest level in 37 years. With Andrew Bailey abandoning the race to the top, the outlook for sterling is bleak.
GBP/USD +0.52% at 1.1320
EUR/USD +0.43% at 0.9873
Oil rises after 2-days of declines
Oil prices are rising, snapping a two-day losing streak, boosted by optimism of higher demand from China and heightened geopolitical risks from Russia, which overshadows recession fears after central banks across the globe, including the Fed, the BoE and the SNB raised interest rates.
Several Chinese state oil refineries and a privately run mega refiner are weighing up a run increase by 10% this month and next, amid expectations of strong demand in the coming quarter.
Crude oil stock pikes rose 1.1 million barrels in the week ending September 16. Less than the 2.2 million barrels forecast, supporting prices.
WTI crude trades +1.6% at $84.01
Brent trades +1.5% at $90.81