- US futures gained strength Monday ahead of a busy week comprising the Fed meeting and earnings.
- The market largely expects a 75-basis point rate hike, but fears of recession are growing.
- Meanwhile, oil prices extended last week’s gains thanks to a slight easing in the value of the US dollar.
US futures rose on Monday as investors brace for a busy week of interest rate decisions by the Federal Reserve, as well as a slew of quarterly earnings from Big Tech that could shed further light on the state of the underlying economy.
In Europe, the continent-wide Stoxx 600 was up 0.2% in morning trading.
The Fed is expected to raise interest rates again when policymakers meet on Tuesday and Wednesday as the US economy grapples with raging inflation that rose by 9.1% through June. The overarching concensus is that the Fed will raise rates by 75-basis points, however top economists like Mohamed El-Erian said a 100-basis-point hike remains on the table.
“There won’t be new economic projections in this meeting so all focus will be on how the Fed guides us in a world where no-one should really believe central bank forward guidance anymore as it’s proved very unreliable over the last year,” analysts at Deutsche Bank said.
With rate hike talks comes the worry of the US economy tumbling into a recession, which continues to weigh on investors’ minds.
Meanwhile, corporate earnings results from the likes of Microsoft, Meta and Amazon are due this week alongside oil majors and key consumer-focused companies.
“If results are weaker than expected, then the market will remain vulnerable to a sharp pullback,” Saxo Bank strategists said.
Social media company Snap became the latest company to warn in its results about the challenging economic backdrop. Shares in the Snapchat owner plunged 39% on Friday after a slump in ad revenue hit its second-quarter earnings.
On other fronts, the dollar index fell 0.3% to around 106.32 after falling more than 1% last week, but was still within sight of its recent 20 year highs, thanks to investors seeking out the US currency as a safe-haven in case of an economic downturn.
In oil markets, prices rose with the global benchmark Brent crude gaining 1% to trade at $99.42 a barrel, extending last week’s 2% rally, as the dollar eased.
In Asia, stocks dropped as concerns about a global economic slowdown reduced investor appetite for risk-assets. Hong Kong’s Hang Seng fell 0.22% while the Nikkei 225 and Shanghai Composite fell 0.77% and 0.60% respectively.