US open: Stocks rebound as sanctions are not as harsh as feared

US futures

Dow futures +0.7% at 33840

S&P futures +0.8% at 4340

Nasdaq futures +1.12% at 14029

In Europe

FTSE +0.35% at 7544

Dax +1.2% at 14853

Euro Stoxx +1.4% at 4040

Relief rally lifts stocks

US stocks are set for a firmer open after steep losses in the previous session, which saw the S&P 500 fall into correction territory. Risk sentiment appears o be cautiously improving as investors digest the latest Russia, Ukraine headlines and the sanctions imposed by the West.

Headlines remain concerning, with Ukraine announcing a state of emergency for the whole country and world leaders expecting Russia to invade Kiev soon. However, the markets are focusing on the less aggressive than expected sanctions, prompting a relief rally in both Europe and the US.

The first round of sanctions were not hard hitting, targeting banks and the elite and certainly weren’t the harsh sanctions that the West were warning of. So far, these appear to be more of a warning shot.

The S&P entering correction territory, coupled with relief from the not so server sanctions has prompted bargain hunters to jump in.

In corporate news:

Tesla trades 1.6% higher pre-market after announcing plans to expand production at its Shanghai factory to meet growing demand.

Lowe’s trades over 3% higher pre-market after reporting a 5% rise in sales in the final quarter of the year. The home improvement retailers reaped benefits from the tight real estate market with Americans buying, repairing or renovating new homes.

Where next for the S&P 500?

The S&P 500 has been trending lower since February 10, it trades below its falling trend line and the 50 & 100 smas on the 4-hour chart. The 50 sma also crossed below the 100 sma in a bearish signal. The price rebounded off 4255 reached at the start of the week and has been grinding higher, supported by the bullish crossover on the MACD. Buyers will be looking to break above 4365 the February 14 low and yesterday’s high to expose 4400 the 50 sma, falling trend line and weekly high. Failure to push above 4360 could see the price fall back to wards 4270 the late January low ahead of 4250 the February low.

FX markets USD falls, AUD rallies

USD trades lower as risk sentiment is improving, there is no major US data due for release today, so the greenback is likely to be driven by risk appetite.

AUD/USD is outperforming its major peers thanks to rising risk sentiment and after Australian wage data rose to 2.3% YoY in Q4, up from 2.2% in Q3. This marked the fastest pace of wage growth in over three years.

EUR/USD is pushing higher, supported by risk appetite. The euro is looking past German consumer sentiment data which revealed that morale unexpectedly fell to -8.1, down from -6.7. Weaker confidence comes as inflation remains stubbornly high.

GBP/USD  +0.05% at 1.3592

EUR/USD  +0.15% at 1.1342

Oil rises to fresh 7 year high, then falls

Oil prices are falling lower, extending the pull back from 7-year highs reached yesterday, as fears over supply disruption ease. The first round of sanction from the West made it clear that the intention was not to disrupt oil or the energy markets. S

sanctions were focused on banks and Russian elites, rather than those targeting oil and gas flows. Even so, oil prices are likely to see continued support as the geopolitical tensions in eastern Europe continue. There is always the concern that Russia could start limiting supply in retaliation to the sanctions.

Meanwhile, the potential of Iranian oil returning to the market is also adding pressure to oil prices, as talks in Vienna to revive the nuclear deal are moving towards the conclusion.

WTI crude trades -0.5% at $91.12

Brent trades -0.45% at $93.82

Learn more about trading oil here.

Looking ahead

21:30 API crude oil inventories

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