US open: Wall Street rallies as eastern European tensions ease

US futures

Dow futures +1.06% at 34917

S&P futures +1.2% at 4457

Nasdaq futures +1.8% at 14523

In Europe

FTSE +0.97% at 7597

Dax +1.9% at 15370

Euro Stoxx +1.5% at 4126

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Turnaround Tuesday

US futures are set to open on the front foot on reports that Russia is pulling some of its troops away from the Ukraine border, easing geopolitical tensions.

Fears of a Russian invasion into Ukraine peaked yesterday before Putin indicated that Russia was willing to keep talking to US and NATO. Optimism surrounding a last effort at diplomacy lifted US stocks off their lows yesterday and boosting risk sentiment today. This news combined with the removal of some troops from the border is a definite step in the right direction, although as the NATO Secretary General pointed out, little has actually changed yet.

The markets will continue to monitor headlines closely, with heightened volatility expected to continue.

In addition to geopolitical developments, inflation remains a very real concern. US PPI saw wholesale inflation print at 9.7% YoY in January, in line with December, but well ahead of the 9.1% forecast. On a monthly basis PPI jumped 1%, up from 0.4%. Hopes that US wholesale inflation might start falling in January have been dashed, pouring cold water on any ideas that inflation had peaked.

The data came following comments from Fed hawk James Bullard who doubled down on his desires for interest rates to rise 1% by July 1^st.

In corporate news:

Rivian trades +5% pre-market after it was revealed that seven state government employee pension funds, in addition to hedge funds bough shares in the EV maker in Q4 last year

Airbnb is due to report after the close.

Where next for the S&P?

The S&P 500 fell to a two week low of 4353 in the previous session. The price attracted buyers back in and rebounded off this level, moving back over its multi-week rising trendline resistance turned support before running into resistance at the 100 sma at 4460. The bullish crossover on the MACD is keeping buyer’s hopeful of further gains. Buyers will need to break above 4460 in order to expose 4500, the 50 sma, and round number and look towards 4530 the February 11 high. Meanwhile sellers would look for a break below the trendline support at 4425 opening the door to 4400 round number and 4360. A move below here could see the sellers pick up momentum.

FX markets USD falls, EUR rebounds

The USD is falling on safe haven outflows, the easing of Russia-Ukraine tension has prompted risk on trade, hurting demand for the greenback. Not even stronger than forecast PPI inflation has lifted the US dollar.

The EUR is outperforming its major peers, rebounding from steep losses yesterday. Eurozone GDP regains pre-pandemic size, despite a slowdown over the winter. The GDP confirmed the preliminary reading of 0.3% QoQ. Meanwhile German ZEW economic sentiment improved in February climbing to 54.3, up from 51.7. The data suggests that financial market experts expect the economy to recover in the first half of the year as pandemic restrictions are eased.

GBP/USD  +0.35% at 1.3509

EUR/USD  +0.45% at 1.1416

Oil falls towards $90

Oil prices are falling away from the 7 year high reached yesterday as tensions between Russia and Ukraine tone down. Some Russian troops are being pulled back from the border, de-escalating the situation. The risk premium which had been priced sand which lifted oil prices to fresh 7-year highs is unwinding.

In addition, US – Iran nuclear talks are also in focus. Successful talks to revive Iran’s nuclear deal could see Iranian oil flooding back to the market, if sanctions are removed.

US API stockpile data is due later and is expected to show a draw on inventories, highlighting tight supply in the market.

WTI crude trades -3.3% at $90.45

Brent trades -3.2% at $92.30

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Looking ahead

21:30 API crude oil stockpiles

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