US Open: Stocks extend gains as banking crisis fears subside

US futures

Dow futures +0.96% at 32535

S&P futures +0.86% at 3984

Nasdaq futures +0.51% at 12630

In Europe

FTSE +1.76% at 7530

Dax +1.85% at 15200

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• Stocks, including regional lenders rise as banking crisis fears ease
• FOMC meeting begins
• Nike reports after the close
• EUR rebounds on banking optimism
• Oil rises after steep losses as recession fears calm

Stocks, including regional banks, rebound

US stocks are set to open higher, extending yesterday's rally Friday and as investors look ahead to the Federal Reserve’s interest rate announcement.

The market mood has improved following the takeover of Credit Suisse by UBS and the announcement of additional liquidity by central banks. Regional banks in the US, which also looked weak in recent sessions, are also recovering.

Investors are hoping that this will draw a line under the banking crisis, which has caused significant volatility over the past 10 days. It is too early to say whether this is the end of the crisis or just a pause before further problems emerge. However, the market has certainly been buoyed by the rapid action taken by the central banks and authorities.

Attention is now turning to the Federal Reserve 2-day monetary policy meeting, which kicks off today, and where the central bank is expected to agree to a 25 basis point rate hike slower than the initially expected 50 basis point rate hike in light of the recent banking turmoil.

As ECB president Christine Lagarde pointed out earlier in the week, “financial stability tensions could have an impact on demand and may actually do the work that would otherwise be done by monetary policy and interest rate hikes”.

On the data front, US existing home sales for February are expected to show an annual increase of 4.2 million with a month-to-month increase of 5%, up sharply from a 0 .7% decline previously

Corporate news

First Republic Bank is rebounding from record lows following an offer of help from JPMorgan Chase and Co to create a stability plan; after falling 90% in recent sessions, the stock has jumped 20% higher in premarket trading. Other regional lenders, such as western alliance Bancorp and PAC W Bancorp are also rising.

Meta rises after Morgan Stanley upwardly revised the stock to overweight from equal weight while adding that the stocks could have a 25% upside ahead.

Nike is due to report after the close. Expectations are for EPS of $0.55c, down 36.7%  as revenue rises 5.5% to $11.47 billion.

Where next for the S&P 500?

The S&P rebounded from 3808 in March low, pushing back over the year-old falling trend line and the 100 and 200 sma. However, the price failed at the resistance of the 100 sma at 3957 and rebounded lower. The RSI is attempting to cross above 50, which, combined with the bullish crossover on the MACD is keeping buyers hopeful of further upside. Buyers will now look for a rise above the 4,000 psychological level and the 50 sma at 4020 to extend the rise towards 4075 and create a higher high. On the downside, support can be seen at 3935 the 200 sma, a fall below here negates the near-term up trend.   

FX markets – USD falls, EUR rises

The USD is falling as investors turn their attention away from the banks onto the Fed rate decision as the two-day meeting kicks off today. The USD has had limited demand as a safe haven as the market worried that the Fed could slow the pace of hikes or even pause rate hikes as cracks appeared in the banking sector.

EUR/USD is rising as investors cheered the improved market mood and easing bank contagion fears. Investors have shrugged off worse-than-expected German ZEW economic sentiment data, which fell by more than expected 213 in March, down from 28.1 in February. This was worse than the 17.1 forecasts, as the banking crisis hit sentiment. However, the rapid response from the central banks and governments means investors are looking past the weak data point.

GBP/USD is edging lower after running into resistance at a five-week high. Data showed that government public spending hit a record high in February owing to the energy support. The budget deficit widened despite higher tax receipts and lower interest payments on debt.

EUR/USD +0.58% at 1.0779

GBP/USD -0.2% at 1.2250

Oil rises after steep falls

Oil prices are rising for a second straight day as the market made continues to improve following do UBS Credit Suisse deal. Fears of a banking crisis and a recession have eased, brightening the oil demand outlook at least for now.

This is over the health of the banking sector, and hitting economic growth pulled oil over 10% lower last week. However, this week oil is already trading up 2.5%.

Attention is turning to the API inventory report, which is expected to show lower crude and product inventories.

Following this, all eyes will be on the Fed’s interest rate announcement tomorrow. The next OPEC meeting is in April.

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WTI crude trades +1.2% at $66.50

Brent trades at +1.2% at $74.30

Learn more about trading oil here.

Looking ahead

14:00 US existing home sales

20:30 API oil inventories