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US equity futures moved higher Tuesday, while the dollar retreated from its two decade peak and Treasury bond yields eased, as investors cautiously test risk markets ahead of a key series of jobs sector readings later in the week.
The dollar pullback, perhaps the most significant factor in the overnight optimism, was linked in part to bets on faster interest rate hikes from the European Central Bank, which will gather in Frankfurt for its next policy meeting on September 8 – two weeks before the Federal Reserve’s next decision in Washington.
Bets on a 75 basis point move from the ECB, following its first move higher since 2014 last month, are now passing 50% in European rate markets as members of the central bank’s Governing Council warn of inflation risks linked to the region’s energy crisis.
Here in the US, with data on opening, quits, hiring and layoffs due later today, ADP private payrolls looming Wednesday, weekly unemployment claims Thursday and the key August non-farm payroll report on Friday, investors are paring bets on a third 75 basis point rate hike from the Fed, although the odds are still pegged at around 68.5%, according to the CME Group’s FedWatch.
Market optimism was tempered, however, by news of fresh Covid lockdowns in China, where officials continue to enforce their ‘zero Covid’ health policies. Dalian’s 5.9 million citizens will be unable to move freely for the next three days, while citizens in Shenzen will face strict rules on gathering and commerce following new infection outbreaks.
The reports kept a lid on global oil prices in overnight trading, with Brent crude contracts falling $3.74 per barrel to $101.35 and WTI futures down $2.79 to $94.22 per barrel.
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The US dollar index was marked 0.28% lower against its global peers at 108,537 while benchmark 2-year Treasury note yields were holding at 3.417% in overnight trading.
In Europe, banking stocks powered modest gains for the region-wide Stoxx 600, which was marked 0.7% higher in mid-day Frankfurt trading, while the MSCI ex-Japan index in Asia ended the session with a 0.64% gain even with the Covid -linked weakness in China stocks.
On Wall Street, futures tied to the S&P 500 are indicating a 29 point opening bell gain while those liked to the Dow Jones Industrial Average are priced for a 195 point move to the upside. Futures linked to the tech-focused Nasdaq are indicating a 125 point advance.
Meme stock favorite Bed, Bath & Beyond (BBBY) shares surged 11.8% as retailer investors poured back into the struggling retailer ahead of its turnaround update later in the week.
Best Buy (BBY) shares jumped 2.7% after the tech-focused retailer posted better-than-expected second quarter earnings thanks in part to deeper discounts that offset a pullback in consumer electronics spending.
Peloton Interactive (PTON) shares rose 1.9% after the connected fitness group asked the Securities and Exchange Commission for more time to file its annual report.
Lucid Group (LCID) shares bumped .2.7% lower after the luxury electric vehicle maker unveiled plans to raise around $8 billion to boost its working capital.
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