US open: Stocks rebound but set for weekly losses

US futures

Dow futures +0.65% at 30138

S&P futures +0.78% at 3700

Nasdaq futures +1% at 11242

In Europe

FTSE +1% at 7115

Dax +1% at 13800

Euro Stoxx +1.22% at 3467

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Fed willing to risk a recession

US stocks are pointing to a higher open but are still set for steep losses across the week. Plenty of action from central banks across the week has raised recession fears.

Central banks have shown that they are not afraid to tighten monetary policy aggressively in order to bring inflation lower, even if that means a recession.

Whilst we are seeing some bargain hunters out today, the move higher is not convincing. The market is still looking for those elusive signs of passed peak inflation in order to be able to pull itself higher.

Meanwhile, recession fears are likely to be the main driver over the coming weeks. As long as inflation is rising, central banks will tighten, and growth will slow.

Looking ahead, Federal Reserve Chair Jerome Powell is due to speak. Investors will be watching for any further comments regarding policy. US industrial production data is expected to show 0.4% rise MoM, down from 1.1%

In corporate news:

Alibaba rises pre-market on news that ANT has a financial holding company approved, as it emerges from the regulatory crackdown. Alibaba has a 33% stake in ANT.

Twitter rises after Elon Musk says that he is still committed to the bid for the social media platform.

Where next for the Nasdaq?

The Nasdaq continues to trend lower, creating a series of lower lows and lower highs. The chart is bearish and whilst the RSI remains out of oversold territory there could be more downside to come. Sellers need to break below 11035 yesterday’s low to open the door to 10680 the September 2020 low. Buyers will be looking for a move over 11480 the May 20 low and 11650 the May 12 low to expose the 20 sma at 12145.

FX markets – USD rises, JPY tumbles.

USD is rising after steep losses yesterday. The greenback is rebounding even as treasury yields head lower. Attention is now shifting to a speech by Powell later today. Despite today’s fall the USD index is on track to book gains across the week after the Fed hiked rates by 75 basis points and signaled more hikes to come.

USD/JPY trades firmly higher, heading back towards 135.00 after the BoJ kept interest rates unchanged and stuck to its dovish stance. The BoJ sees no reason to tighten monetary policy despite central banks across the globe hiking aggressively. The BoJ did note that it would be watching the FX implications.

EUR/USD is falling on USD strength and after Eurozone inflation data confirmed the 8.1% reading, the record high level, up from 7.4% in April. The ECB is set to hike rates in July and is currently devising a tool to ease fragmentation fears.

GBP/USD  -0.68% at 1.2267

EUR/USD  -0.57% at 1.0487

Oil set for first weekly fall after seven weeks of gains

Oil prices are heading lower after gains in the previous session. However, across the week oil prices are set to fall, after seven straight weeks of gains.

Oil rose yesterday after the US applied fresh sanctions to Iran, tightening supply in an already tight market.

However, fears over a recession, as central banks tighten monetary policy aggressively, are impacting the demand outlook, driving prices lower across the week. Slower growth often means reduced demand.

WTI crude trades -0.3% at $114.30

Brent trades -0.3% at $117.70

Learn more about trading oil here.

Looking ahead

14:15 US industrial production

18:00 Baker Hughes rig count