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Futures are rising after upbeat comments from President Biden, boosted optimism that a debt ceiling agreement could be reached soon.
 

Debt ceiling talks to resume tomorrow

US stocks are pointing to a stronger open after losses last week, amid optimism surrounding US debt ceiling negotiations.

After talks were pushed back last week, US President Biden has voiced optimism that a deal could be reached. The debt ceiling continues to be a key focus for the markets this week as the US drifts closer toward a default if politicians fail to agree on lifting the $31.4 trillion.

House Speaker Kevin McCarthy and other congressional leaders are due to hold further talks tomorrow.

In addition to the ongoing debt ceiling jitters, concerns over regional banks and the Federal Reserve’s next steps have also been weighing on risk sentiment. The S&P 500 finished last week 0.3% lower. Of note, this was the 6^th straight week that the market failed to move more than 1%, suggesting that stocks are struggling for a firm direction.

Looking ahead, there are plenty of Federal Reserve speakers hitting the wires today. Investors will be listening closely for clues over whether the Fed is likely to raise interest rates again in June.

The market is currently pricing in a 12% probability of a rate hike in June. This is down from 16% earlier today after the NY Empire manufacturing data. The gauge for manufacturing in the New York state tumbled 42.6 points to -31.8 in May down from 10.8 in April and well below the -3.75 forecast, underscoring the widespread pessimism towards the sector.
 

Corporate news

Ford rises pre-market after announcing plans to reduce costs in China after sales in the region slumped.

Meta rises 1.2% after Loop Capital upgraded the stock to buy from hold, citing an improving revenue outlook.

Retailers such as Target, Home Depot, and Walmart are due to release earnings this week.
 

Dow Jones outlook – technical analysis

The Dow Jones rebounded lower off resistance at 34265, dropping below the 20 sma before finding support on the 50 sma. The price currently trades caught between the 20 sma and the 50 sma; the RSI is neutral at 50 giving away few clues. The overriding trend is bearish, with sellers looking for a break below the 50 sma at 33150, and last week’s low, to test 32935, the May low. Meanwhile, a sustained rise over the 100 sma at 33350 could see bulls take aim at the 20 sma 33650 and 34000 round number ahead of 34265, the May high.

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FX markets – USD falls, EUR rises

The USD is falling after strong gains across the previous week. The long-term inflation expectation in the Michigan consumer confidence report was at the highest level since 2011.  The USD will look to the slews of Fed speakers for further clues over direction.

EUR/USD is rising, capitalising on the weaker USD, despite German wholesale prices falling -0.5% YoY, in April down from 2%, marking the first decline in prices since December 2021. Meanwhile, eurozone industrial production fell -1.4% MoM in March, well below the 0.9% rise forecast.

GBP/USD is rising above 1.25 after steep losses last week after the BoE raised interest rates by 25 bps but sounded optimistic that inflation would fall rapidly across the second half of the year. Tomorrow’s wage data will be a key factor as to whether the BoE could hike interest rates again in June.

EUR/USD -0.22% at 1.0875

GBP/USD +0.46% at 1.25
 

Oil edges higher after 4-weeks of declines

Oil is rising after booking losses across the past four weeks. Optimism over possible tighter supplies is offsetting concerns over demand in China and the US, the world’s largest oil importer and consumer.

Last week data from China raised concerns that over the health of the economic recovery as domestic demand and industrial profits fell sharply. Meanwhile, fears of a recession in the US as the country risks default on its debt obligations also dragged on the oil demand outlook.

These fears are being offset by rising bets that OPEC+ could tighten oil supply further in the second half of the year and expectations that the US could start repurchasing oil to replace strategic reserves after completing the sale in June.

WTI crude trades +0.6% at $70.40

Brent trades at +0.6% at $74.42
 

Looking ahead

14:15 Fed Kashkari speech

17:30 Fed Barkin speech

22:00 Fed Cook speech

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