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Stocks point to a cautiously higher start, ahead of US CPI & Fed rate decisions later this week.

US futures

Dow futures +0.082% at 33895

S&P futures +0.15% at 4309

Nasdaq futures +0.35% at 14593

In Europe

FTSE +0.08% at 7564

Dax +0.62% at 16043

• Fed expected to skip a June hike
• Oracle rises ahead of the earnings release
• USD falls ahead of FOMC decision this week
• Oil drops as Goldman Sachs cut its outlook
   

Fed expected to skip a June hike

US stocks are set for a modestly higher start, with the S&P 500 hovering around a 10-month high, extending last week's upbeat tone as investors look ahead to Wednesday's Federal Reserve interest rate decision.

The market is pricing in a 75% probability that the Fed will skip a June interest rate hike after a series of weaker-than-expected U.S. economic data. US ISM services PMI, factory data, and jobless claims came in below forecasts. The pause would give the Fed more time to assess the impact of the 500 basis point rate hikes this cycle on the economy, ahead of another possible rate hike in July.

While no economic data is due to be released today, US inflation data tomorrow could change expectations for the Wednesday meeting. Economists predict inflation will cool to 4.1% YoY, although core inflation is expected to rise.

While the S&P 500 rallied into a bull market last week, up 20% from its March lows, there are concerns that the narrow base to the rally makes it particularly vulnerable. Just a handful of stocks also known as the magnificent 7: Tesla, Meta, Alphabet, Apple, Amazon, Nvidia, and Microsoft.
 

Corporate news

Nio drives higher after the Chinese EV maker said it was cutting prices and ending free battery swaps for new buyers.

Oracle is on the rise ahead of earnings for the fiscal fourth quarter, which are expected after the bell. Evercore ISI that on Friday that it expects a solid quarterly report and positive commentary surrounding the cloud business. Oracle has seen Evercore ISI, Barclays, and JP Morgan all raise their target price for the stock in recent days.

Carnival is trading 5.5% higher premarket following a broker upgrade from JP Morgan, who upwardly revised the shares to overweight, citing continued demand momentum in the industry.
 

S&P 500 outlook – technical analysis

The S&P 500 has been trending higher, trading above its 20, 50 & 100 sma and a multi-month rising trendline. More recently, the price trades within an ascending wedge, typically a reversal pattern. Immediate resistance can be seen at 4325, the 2023 high. Support can be seen at 4300, the rising trendline of the wedge. It would take a break below 4257, last week’s low, to form a lower low.

(Click on image to enlarge)

FX markets – USD falls, EUR rises

The USD falls, extending losses from last week as investors are increasingly convinced that the Fed will skip a rate hike in June after a series of weaker-than-expected data.

EUR/USD is as the euro capitalizes on a weaker U.S. dollar. Expectations of a 25-basis point rate hike by the ECB on Wednesday support the euro. Although the upside could be limited after inflation cooled by more than expected in May, raising questions over how many much more the ECB will hike.

GBP/USD is falling despite hawkish comments from Bank England official Jonathan Haskell, who warned that interest rates could rise higher to fight inflation. The interest rate is currently 4.5%, and the Bank of England is expected to hike rates by a further 25 basis points next week. The market is pricing in a peak rate of 5.5%, while economists expect the peak rate to be 4.75%.

EUR/USD +0.13% at 1.0764

GBP/USD -0.18% at 1.2557
 

Oil falls as Goldman Sachs lowers its oil price forecast

Oil prices are falling after Goldman Sachs lowers its price estimate for Brent crude and $90 per barrel for the end of this year and WTI to $81 per barrel.

The downward revision comes after a series of weaker-than-expected data from China, the world's largest oil importer, raising concerns over the health of the economic recovery. Producer prices dropped at the fastest pace in seven years, and exports and imports, and factory activity also declined.

Elsewhere, Iran says it was open to a deal with the rest over reviving its nuclear program. Should a deal be reached, the market could be flooded with additional supply, ah sanctions on Iranian oil may be lifted.

Oil prices are also looking nervously ahead to the Federal Reserve interest rate decision on Wednesday and the impact that this could have on the US dollar and the oil demand outlook.

WTI crude trades -2.7% at $68.30

Brent trades at -2.37% at $72.97
 

Looking ahead

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