US open Wall Street Steady, USD Rallies, Covid Jitters Return

US set of open broadly unchanged whilst the safe have US Dollar rises, amid an increase rise in covid uncertainty.

USA (2)

US futures

Dow futures +0.04% at 34425

S&P futures +0.1% at 4284

Nasdaq futures +0.3% at 14391

In Europe

FTSE -0.4% at 7110

Dax +0.16% at 15634

Euro Stoxx -0.13% at 4115

Infrastructure deal, covid cases & Fed speakers

US stocks are looking to open largely unchanged, hovering around record highs, as investors digested the latest developments surrounding President Biden’s infrastructure deal, covid cases and look ahead to the release of US non farm payroll data later in the week.

President Biden, over the weekend back tracked on the idea that he would veto the new bipartisan infrastructure deal announced at the end of last week if Democratic spending plan didn’t also pass through Congress. This row back has helped sentiment.

On the other hand, rising covid cases in Asia, Australia and the UK is weighing on sentiment, and prompting a rethink of the reflation trade. As the Delta variant of covid spreads, concerns are growing that the key summer holiday season in Europe could be missed again. Travel and tourism stocks are under pressure as is the Spanish Ibex, as Spain’s economy is heavily dependent on tourism.

Concerns are lingering that the highly contagious covid strain could derail a return to normal. As a result, cyclicals and value are under pressure whilst high growth tech looks set to outperform.

Today there is little in the way of economic data. Investors will look ahead to Friday’s non farm payroll report, which is expected to show 675k new jobs added and unemployment tick lower to 5.7%.

Fed speaker could drive movement today with Fed Williams due to speak ahead of the open. Investors will be watch closely following Friday’s slight miss in PCE MoM data.

Where next for the Nasdaq?

The Nasdaq trades within an ascending channel on the 4 hour chart dating back to  mid May.  The price currently trades on the mid point of the channel. The RSI supports further gains whilst it remains out of overbought territory. Buyers are targeting 14432 for fresh all time highs. Sellers will be looking for a move below 14250 to negate the near term uptrend and for sellers to gain momentum.

FX – USD rises, GBP shows resilience

The US Dollar is advancing as investors seek out its safe haven properties. Rising covid cases and fears that it could disrupt the summer travel season are weighing on sentiment.

GBP/USD is holding its ground versus the US Dollar amid expectations that the new health Secretary Sajid Javid will continue ahead with the final lifting of covid restrictions on July 19th. Despite covid cases surging to 14,500, deaths remain low suggesting that the link between infection and death may have been broken by the vaccine.

GBP/USD  +0.1% at 1.3891

EUR/USD  -0.24% at 1.1906

Oil hits $74 ahead of OPEC+ meeting

Oil prices pushed higher in early trade, reaching a fresh two-and-a-half-year peak before drifting lower. Oil prices have rallied for the past 5 weeks, gaining over 15% since mid-May. As economies have reopened, fuel demand has surged. Meanwhile, supply has remained capped by OPEC+ supply cuts imposed last year.

The OPEC+ group has started to ease supply cuts between May and July. However investors are looking ahead to the OPEC+ meeting to see where the group goes from here. Given the demand is outstripping supply and draining inventories - an increase in production is expected. How large that increase is will dictate where the market goes from here. Between 250,000 bpd – 500,000 bpd is expected and is likely to be absorbed by the market.

US crude trades -0.19% at $73.77

Brent trades -0.3% at $75.24

Looking ahead

14:00 US Fed Williams Speech

15:00 Dallas Fed Manufacturing Business Index

18:10 Fed Quarles Speech

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