US open: Stocks point higher as treasury yields ease

US futures

Dow futures +0.14% at 35300

S&P futures +0.19% at 4512

Nasdaq futures +0.2% at 14748

In Europe

FTSE -0.5% at 7633

Dax -0.23% at 15473

Euro Stoxx -0.5% at 4172

Stocks claw back earlier losses

US futures have reversed from session lows, clawing background, setting US stocks on track for a positive open. This comes after a steep selloff in the previous session following the release of hotter than expected US inflation and expectations of a more hawkish Fed.

US inflation hit a 40 year high which fueled expectations that the Federal Reserve will increase interest rates by 50 basis points, up from the 25 basis points previously expected. Fed President James Bullard compounded hawkish expectations saying that the Fed should hike by 1% before July. Goldman Sachs are expecting 7 rate hikes across the year.

US treasury yields shot higher yesterday whilst stocks, particularly high growth tech stocks received a battering. Today yields are easing which is taking the pressure off US stocks and pulling the dollar lower.

Looking ahead US Michigan consumer confidence is expected to rise, which is encouraging given the sky high inflation. Confidence is expected to rise to 67.5 from 67.2.

In other corporate news:

Expedia is set to open 5% higher after beating estimates on the top and bottom line. EPS rose around 45% to $1.06 whilst revenue hit $2.8 billion against 2.29 billion forecast. The data suggests that holiday makers are returning to the market.

Where next for the Dow?

FX markets USD falls, GBP/USD rises

The USD is rising after booking mild gains yesterday following the CPI report. US treasury yields are easing after a strong knee jerk reaction and the greenback has fallen from its session highs. Whilst some Fed officials have expressed a more hawkish stance since the release, others still favour a 25 -point rate rise over a 50 basis point hike.

GBP/USD is on the rise for a second straight session after data showed that the UK economy was more resilient than expected in the final quarter of 2021. The UK economy contracted -0.2% in December, ahead of the -0.5% contraction forecast. QoQ UK GDP grew 1% in Q4, in line with the Q3. The data suggests that the Omicron hit was more contained.

GBP/USD +0.25% at 1.3593

EUR/USD -0.11% at 1.1416

Oil rises but still set for weekly declines

Oil prices are on the rise after paring yesterday’s losses but are still on track for the first weekly loss after 7 weeks of gains.

Oil has jumped after a report from the IEA which saw it raise its demand outlook forecast for 2022 by 800,000 barrels per day owing to revisions that it has made to historical data. The report comes after OPEC said that oil demand could rise more strongly this year owing to the post pandemic recovery.

The IEA confirmed that supply was tight and highlighted that the OPEC+ group produced 900,000 barrels per day below their January quota. OPEC+ are supposed to be raising output from next month, but if they are already missing the quota, there are concerns that supply will remain tight.

Baker Hughes rig count is due later.

WTI crude trades +1.1% at $91.77

Brent trades +1.25% at $89.98

Looking ahead

15:00 Michigan consumer sentiment

18:00 Baker Hughes rig count

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