US open: Stocks rise after Bank of America beats forecasts

US futures

Dow futures +0.95% at 29965

S&P futures +1.2% at 3630

Nasdaq futures +1.7% at 10850

In Europe

FTSE +0.6% at 6911

Dax +0.97% at 12593

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Earnings in focus

US stocks are heading higher after better-than-expected earnings from Bank of America and as the mood improves as UK Chancellor Hunt rips up the min-budget.

The economic calendar is quiet today, leaving investors to focus mainly on earnings, helping the market mood. Upbeat numbers from Bank of America keep investors from fretting over rising interest rates and recession fears.

The move higher comes after San Francisco’s Fed President Mary Daly said she was supportive of raising rates to between 4.5% - 5%, which will be the most likely outcome.

Analysts at Morgan Stanley have also turned bullish on stocks in the short term, saying that after a 25% selloff this year, the S&P500 is testing its 200-week moving average. Should bulls successfully defend this level, then a recovery could be on the cards.

Chinese stocks listed in the US rose after President Xi Jinping reiterated that economic development is the party’s top priority. Support for the tech sector was highlighted in a speech, although support for the zero-COVID policy was also noted.

Corporate news:

Bank of America is rising pre-market after reporting a its highest net interest income in over a decade. Top and bottom lines beat estimates in Q3.

Apple is rising pre-market after Morgan Stanley named it a top pick for its ability to withstand an economic downturn.

Where next for the Nasdaq?

The Nasdaq continues to trade within a descending channel, which along with the bearish RSI suggests that there could be more downside to come. Buyers would need to rise above 11200/300 Friday’s high, and the falling trendline resistance, 20 sma in order to push higher towards 11700 the October high. A move above here creates a higher high and would be significant, exposing the 50 sma at 12100.

FX markets – USD falls, GBP jumps

The USD is falling as the USD bulls pause for breath. The USD rallied last week after hawkish FOMC minutes, hotter than forecast inflation data and signs that the US consumer remains resilient.  Over the weekend, Kansas City Fed chief Esther George warned of the dangers of rising rates too quickly.

EUR/USD is rising, capitalizing on USD weakness. However, it is doubtful whether this is the start of a new trend, given the Fed’s aggressive path for tightening ahead.

GBPUSD is rebounding after the new Chancellor, Jeremy Hunt, reverses almost all the tax measures set out in the mini-budget three weeks ago. Hunt also announced measures to raise £32 billion and plans to cut income tax would be scrapped indefinitely. The moves have helped restore some credibility in the UK economic outlook. The pound, FTSE and bonds all rise in response to the announcement.

GBP/USD  +1.15% at 1.13

EUR/USD  +0.24% at 0.9750

Oil holds steady after losses last week.

Oil prices are holding steady after losses last week. Whilst recession fears continue to hurt the oil demand outlook, this was offset by China’s continuation of loose monetary policy.

A late slump in oil prices on Friday as failed to inspire much in the way of bargain hunters and trading volumes remain weak.

China, the world’s largest oil importer will be in focus this week with the Communist Party Congress. Q3 GDP and trade data will also be released, shedding some light on how the economic recovery is progressing after COVID lockdowns.

WTI crude trades +0.1% at $84.90

Brent trades +0.2% at $91.10

Learn more about trading oil here.

Looking ahead

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