US open: Stocks rise as China eases COVID restrictions

US futures

Dow futures +0.43% at 31548

S&P futures +0.85% at 3825

Nasdaq futures +0.27% at 12033

In Europe

FTSE +1% at 350

Dax +0.5% at 13282

Euro Stoxx +0.7% at 3567

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Consumer confidence data due

US stocks are set to open higher after booking mild losses in the previous session and upbeat China COVID reports.

China has reduced its quarantine requirements for international travelers, boosting optimism that the worst has passed. Easing COVID restrictions, investors hope will improve global supply chain issues and help lower the possibility of a global recession.

Commodity prices rose on the news with iron ore and copper reversing losses while oil gained. Mining and energy stocks are likely to be the largest gainers as well as airlines, following in the footsteps of European trade.

Looking ahead attention is on US consumer confidence, which is expected to fall again in June to 100.4, down from 106.4. The data comes after Michigan consumer confidence dropped to a record low. Surging prices and the growing risk of a recession are taking their toll on US consumer morale.

Even so, the Federal Reserve will continue with the rate hike program irrespective of consumer sentiment. Whilst Americans have voiced increasing dissatisfaction with their personal economic situation, however, so far, their spending habits are little changed. This would be expected to change soon.

The US economy could well be heading for a recession. The weaker consumer confidence is in June, perhaps the more likely that the US will be heading for a recession

In corporate news:

Nike is falling premarket after forecasting Q1 revenue below estimates. The sportswear retailers expect to discount more and deal with further pandemic-related disruptions in China, its most profitable market.

Major banks are rising after passing the Federal Reserve’s stress test, which has prompted some to hike their dividends.

Where next for the S&P 500?

The S&P500 continues to extend its rebound from 3635 the 2022 low. The rise over the 20 sma combined with the bullish crossover on the MACD is keeping buyers hopeful of further upside. Resistance can be seen at 4025 with a break above here opening the door to 4100 the February low ahead 4200 the June high. Should the 20 sma fail to hold, the price could fall to test support at 3800 the May low ahead of 3635 the 2022 low.

FX markets – USD edges lower

USD is rising ahead of key data after falling for the past three days. Recession fears and expectations that the Fed won’t be able to hike rates aggressively had pulled the greenback lower. Investors are looking at consumer confidence data for clues over the health of the US economic outlook

EURUSD is edging mildly lower after data showed that German consumer sentiment fell to an all-time low in July. The GFK index saw consumer sentiment fall to -27.5, down from -26 as the surging cost of living and rising risks of a recession hurt morale.

GBP/USD is falling as the pound is dragged lower by Brexit and political woes. Attention will be on BoE’s Bailey who is duet o speak later. Hawkish commentary from Bailey could see the pound rebound.

GBP/USD -0.18% at 1.2237

EUR/USD -0.07% at 1.0574

Oil extends gain on supply concerns

Oil prices are rising gains today, extending gains from the previous session. Oil prices rose yesterday after G7 leaders announced plans to extend sanctions on Moscow to include a price cap on Russian oil. Rather than bringing the price down, it is likely to drive Russian oil increasingly towards China and India, tightening supply in Europe.

As attention turns towards OPEC+ which meets to discuss output later this week concerns over spare capacity are ramping up. Reports suggest that Saudi Arabia and the UAE are unable to boost production much more as they are already close to capacity limits. These are the only two countries which could potentially make up for lost Russian supply and weak output from other OPEC countries.

WTI crude trades +0.8% at $109.56

Brent trades +0.8% at $113.22

Learn more about trading oil here.

Looking ahead

15:00 US consumer confidence

21:30 API crude oil stock piles

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