US open: Stocks rise cautiously ahead of the Fed

US futures

Dow futures +0.36% at 30819

S&P futures +0.37% at 3863

Nasdaq futures +0.11% at 11868

In Europe

FTSE +0.75% at 7234

Dax -0.06% at 12665

Euro Stoxx -0.8% at 3462

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Central banks are the only game in town

US stocks are heading carefully higher after booking losses in the previous session and as investors prepare themselves for another large rate hike.

The US central bank will conclude its 2-day monetary policy meeting later today and is expected to raise rates by 75 basis points, its third straight 75 bps points hike. Some are preparing for a 100 basis point hike, but this is not the base case scenario.

The Fed’s growth and inflation projections will also be in focus and could help the market assess how hawkish the Fed is likely to be going forward. With this in mind, it is unlikely to be the rate hike itself that is market moving. Instead, it will be the outlook for further hikes and how hawkish the Fed is expected to be at the future meetings. A more aggressive Fed means the central bank will have more problems engineering a soft landing.

The broader market recovered from weakness early in the European session following a speech by Russian President Putin, who said he was mobilizing troops to defend the annexed part of Ukraine.

Corporate news:

General Mills rises 2% pre-market after raising complete year sales and profits forecasts, amid expectations of resilient demand for cereals, snack bars, and pet food even as prices rise.

Beyond Meat falls 1.4% pre-market after the immediate suspension of its COO following reports of his arrest following an altercation where he bit a man’s nose.

Where next for the S&p500?

The S&P500 fell below the multi-month rising trend line support and has been unable to rise back above the trendline resistance. The RSI supports further downside. Sellers will need to break below 3827, the weekly low, to extend the bearish trend towards 3810, the May low, and 3720, the July 14 low. Buyers could be encouraged by the long lower wicks suggesting that demand is weak at these lower levels. Buyers will look for a rise over 3940, the weekly high to expose the 20 sma at 3966 and the 50 sma at 4047.

FX markets – USD rises,EUR falls

The USD rises firmly for a second straight day and trades around a 20-year high. The USD is benefiting from a combination of hawkish Fed bets and safe haven flows in a win-win trade. Part of the allure of the USD is also because there is no real other alternative.

EUR/USD is falling, underperforming its major peers as investors sell out of the euro after Putin’s announcement. The news, combined with hawkish Federal Reserve bets, leaves few reasons for investors to want to buy into euros.

GBP/USD is also trading under pressure after data showed that the UK government borrowed almost double to forecast amount in August. The UK public sector’s net borrowing jumped to £11.8 billion. Borrowing is likely to increase further to fund PM Liz Truss’s energy support package and additional tax cuts, which will be announced on Friday.

GBP/USD  -0.32% at 1.1340

EUR/USD  -0.63% at 0.99

Oil jumps as Russia fears rise.

Oil prices have jumped higher on news that Putin is mobilizing more troops. The escalation of the war in Ukraine raises fears of a tighter oil and gas supply.

This move by Putin raises the risk of a more prolonged war in Russia. Any hopes of a sooner end to the conflict have been put firmly to bed. This means that supply worries will be here for the longer term.

Separately, there appears to be little hope of a breakthrough to revive the Iran nuclear deal at this week’s UN General Assembly. This effectively reduces the prospect of Iranian barrels returning to the market soon.

WTI crude trades +2.6% at $86.01

Brent trades +2.5% at $91.81

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Looking ahead

15:30 EIA crude oil stockpiles

19:00 Fed rate decision

19:30 Fed Press Conference