US open Reopening optimism and a dovish Fed lift futures

US futures

Dow futures +0.15% at 34382

S&P futures +0.2% at 4171

Nasdaq futures +0.5% at 13386

In Europe

FTSE +0.3% at 7060

Dax +0.05% at 15414

Euro Stoxx +0.2% at 4012

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Stocks rebound led by tech

US futures are pointing to a stronger start amid rising commodity prices, the Fed playing down inflation fears and strong earnings from US retailers. Reopening optimism is overshadowing concerns of rising covid cases in Asia.

Fed speakers have been out in force relaying the Fed’s dovish message since last week’s spike in inflation. The market appears to be all ears with the US Dollar tanking whilst equities, particularly tech stocks, drive higher.

The high growth tech stocks have been under pressure, under performing peers in recent sessions amid fears that the Fed could act sooner to tighten policy. As those fears are easing demand for tech returns.

Soothing comments by Dallas Fed Kaplan and Federal Reserve vice chair Richard Clarida have been tonic to the markets. Kaplan doesn’t see a rate rise until next year and Clarida highlighted the weak jobs data as a reason for the Fed to stay supportive.

The weaker US Dollar is underpinning commodity prices, which are resuming their uptrend after recent weakness. Re-opening optimism is also driving demand for commodities higher.

US building permits and housing starts could garner some interest. The release of the Fed minutes to morrow are likely to be a bigger market mover as investors will be looking closely for any clues of a timeline for scaling back stimulus.

Earnings

Walmart and Home Deport reported blowout Q1 earnings helped by the latest round of stimulus checks.

Macy’s raised its earnings for annual sales and profits amid expectations of pent up demand as shoppers return to stores.

Where next for the Nasdaq?

The Nasdaq formed a double top reversal pattern at the end of April before selling off. The price didn’t complete the double top reversal pattern which would have be down at 12225. Instead the index found support around 12900 the lower band of the ascending channel dating back to late September and has rebounded higher. Currently it trades caught between the lower band of the ascending channel on the down side and the 50 sma at 13450 on the upside showing some indecision. A move over 13400 could open the door towards 14070 resistance. However, a move below 12900 could see the sellers gain traction.

FX – USD weakens, GBP rallies an unemployment falls

The US Dollar is heading lower towards a 3 month low after more dovish Fed rhetoric. Dallas Fed Kaplan reassured the markets that he doesn’t see a rate hike until next year. Federal Reserve vice chair Richard Clarida highlighted the soft jobs market as a reason to keep supporting the US economy. The Dollar is listening loud and clear to the Fed’s dovish calls.

GBP/USD trades above 1.42 after upbeat jobs data. The unemployment rate in the UK unexpectedly fell to 4.8% in the three months to March, down from 4.9% despite the ongoing lockdown restrictions. The claimant count also unexpectedly dropped by 15.1k, rather than rising by 25k as expected.

GBP/USD +0.38% at 1.4207

EUR/USD +0.5% at 1.2215

Oil rises on improving demand outlook

Oil trades on the front foot on Tuesday, although has eased back for session highs. The tussle continues between the re-opening optimism as the West continues to ease lockdown restrictions boosting demand outlook and rising covid cases in Asia. India has seen total covid cases top 25 million and domestic sales of fuel and gasoline by state refiners have declined 20%. These concerns are limiting the upside for oil.

US crude trades +0.3% at $66.40

Brent trades +0.4% at $69.50

Learn more about trading oil here.

The complete guide to trading oil markets

Looking ahead

13:30 Building permits & housing starts

21:30 API crude oil stocks

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