US open: Tech stocks lead the way as Chinese regulation appears to ease

US futures

Dow futures +0.8% at 33160

S&P futures +1.04% at 4150

Nasdaq futures +1.4% at 12737

In Europe

FTSE +1.05% at 7638

Dax +1.3% at 14658

Euro Stoxx +1.3% at 3840

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Stocks edge higher, recouping Friday’s losses

US futures are set to rebound after a softer finish to last week. Stocks fell after the US NFP came in higher than expected, with 390k jobs added in May, fueling bets that the Fed will tighten monetary policy aggressively.

Today tech stocks are expected to outperform, helped higher by Chinese tech stocks amid optimism that regulatory crackdowns on the sector are easing. The Chinese economy needs all the help it can get right now, and a softer regulatory environment will help businesses rebound after the strict lockdown restrictions.

The upbeat mood was lifted further by signs of Beijing and Shanghai returning to everyday life following the easing of lockdown restrictions in China’s biggest COVUD outbreak in 2 years.

Still, inflation concerns are not going anywhere fast. Rising crude oil prices and a strong labour report have lifted bets that the Fed may need to act aggressively to rein in inflation. US CPI data and consumer confidence data, both due on Friday, will be the key focus of the market this week.

All eyes will be on US inflation data for signs that peak inflation could have passed and what that might mean for the Fed’s next moves.

The Fed is expected to hike rates by 50 basis points in June and again in July. What happens after that remains to be seen.

In corporate news:

Tesla shares are rising 2.9% pre-market after CEO Elon Musk backtracks on an email last week in which he indicated that he would cut 10% of the Tesla workforce. Instead, he said that the EV maker’s headcount would rise over the coming 12 months.

Didi Global ADRs jump over 60% on reports that Chinese regulators have ended their year-long investigation into the company and will allow the firm to add new customers again.

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Where next for the S&P500?

The S&P500 rebounded off the 2022 low of 3810, running into resistance at 4200. The price now trades capped on the upside by 4200 and on the lower side by 4100/4070 zone. The RSI is attempting to rise above 50. Buyers will look for a move over 4200 to expose the 50 sma at 4230 and 4300, the May high. Meanwhile, sellers would look for a move below 4100 to expose the 20 sma at 4022 and 4000 round number.

FX markets – USD falls, GBP rises

USD is edging lower after gains in the previous week. The stronger-than-expected non-farm payroll prompted speculation that the Fed would need to act aggressively to cool inflation. Today the price is easing as investors look ahead to CPI inflation data on Friday.

GBP/USD is rising despite Conservative MP’s calling a vote of no confidence this evening against PM Boris Johnson, who has struggled to draw a line under the party gate scandal. In the vote, should over 50% of the 180 MPs support the PM, he can stay. The pound is rising, suggesting that investors are confident that he will breeze through the vote.

EUR/USD is edging higher, capitalizing on the weaker USD in a quiet start to what is expected to be a busy week for the pair with ECB interest rate decision and US CPI inflation due on Thursday and Friday, respectively.

GBP/USD +0.54% at 1.2569

EUR/USD +0.07% at 1.0725

Oil rises as Saudi Arabia lift prices for Asia

Oil prices are rising, building on gains from last week after Saudi Arabia hiked prices for its Asian customers.

The world’s largest oil exporter, Saudi Arabia’s Aramco, lifted prices to $6.50 above a benchmark it uses, up from $4.40 in June. The price for the US remains unchanged.

This hike in price for Asia tells up two things. Firstly, that even after OPEC+ doubled its planned output increase for July and August to 648k bpd, supply is still very tight. And secondly, that demand in Asia is expected to pick up as COVID lockdown restrictions ease.

WTI crude trades +0.86% at $117.50

Brent trades +0.67% at $119.03

Learn more about trading oil here.

Looking ahead

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