US open: Wall Street pares Fed rally, peace talk progress questioned

US futures

Dow futures -0.4% at 33924

S&P futures -0.4% at 4340

Nasdaq futures -0.71% at 13870

In Europe

FTSE +0.4% at 7323

Dax -1.22% at 14277

Euro Stoxx -07% at 3875

Stocks fall, oil rallies, jobless claims beat

US stocks are set to drift lower on the open after a strong rally following the Fed rate hike in the previous session.

The Fed hiked rates by 25 basis points as expected, and the dot plot pointed to around another 6 0.25% hikes across the rest of the year. The market had been pricing this hike in for a long time, so the focus was more on comments from Fed Powell, who was confident that the US economy could handle the hikes without causing a recession.

Separately, peace talks appeared to hit a bump in the road after the Kremlin rubbished claims that progress was being made. This is in contrast to the upbeat reports on peace talks at the start of the week, which has helped boost the market higher. There is almost a feeling here that Moscow is just going through the motions.

On the data front, US jobless claims fell by more than expected. Initial jobless dropped to 217k, down from 229k in the previous week and below the 220k forecast, supporting Fed Powell’s comments that the labour market was strong. Demand for workers remains strong, with over 11 million vacancies in the US to be filled.

Oil prices are again on the rise as supply concerns return, bringing it stagflation fears.

Where next for the Dow Jones?

The Dow Jones pushed over its falling trendline support yesterday but ran into resistance at 34100 and is seen easing lower today. The 50 SMA crossed below the 200 SMA in a death cross bearish signal, which could see sellers test support at 33500, a level which has offered support on several occasions across the past six months. A break below this level could see 33100 come back into play. Meanwhile, buyers could focus on the bullish MACD and look for a move over 34100, ahead of 33500 the 50 sma.

FX markets USD falls, GBP tumbles post-BoE

USD is heading lower, despite the Fed hiking rates and pointing to 6 more hikes across the year. The US dollar failed to capitalize on the more hawkish Fed and extended declines.

EURUSD is rising after CPI inflation was upwardly revised to 5.9%, a record high. This was up from 5.8% in January and ahead of the 5.8% initially forecast.

GBPUSD falls after the BoE voted to hike rates 8-1. With one dissenter, the vote was more dovish than last month and more dovish than forecast, sending sterling lower

GBP/USD -0.4% at 1.3090

EUR/USD +0.07% at 1.1044

Oil rallies on short supply fears

After three straight days of declines, oil prices have jumped higher, pushing back over $100. While optimism surrounding peace talks had pushed oil prices lower at the start of the week, reports from the Kremlin that so much progress hadn’t been made are unnerving the market. Failure to agree on a truce raises oil supply concerns.

Furthermore, the IEA reported that the shortfall from cutting Russian oil supply was much more significant than initially feared and isn’t offset by the hit to demand expected from rising prices. IEA warned that the market could lose as much as 3 million barrels per day, which comes when the market was already extremely tight.

WTI crude trades +6.3% at $98.55

Brent trades +6.2% at $101.44

Looking ahead

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