US open: Stocks react well to Fed jobless claims rise

Wall Street looks set to extend gains after the Fed prepares to rein in support, Evergrande concerns ease and jobless claims unexpectedly rise.

USA (2)

US futures

Dow futures +0.5% at 34450

S&P futures +0.4% at 4411

Nasdaq futures +0.14% at 15200

In Europe

FTSE -0.04% at 7073

Dax +0.73% at 15604

Euro Stoxx +0.75% at 4135

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Stock aim higher as risk sentiment rises

US socks are set for a strong open building on gains from the previous session following the Fed announcement an easing of concerns over Evergrande and and surprise rise in initial jobless claims.

US initial jobless claims unexpectedly rose for a second straight week highlighting the choppy nature of the labour market recovery. Unemployment claims rose to 351,000 when analysts had expected a decrease to 320,000. Broadly speaking the number of initial claims have been falling across the economic recovery. However, the labour market appears to have hit a soft patch. This is by no means a new trend, but certainly does catch the eye, particularly after last month’s weak NFP.

The data comes following the Fed policy announcement. As expected, Fed left monetary policy unchanged. The Fed also decided against announcing the start of asset purchase tapering. Instead, the central bank pushed back the formal announcement saying that the time was approaching when tapering purchases could be warranted. The Fed hinted that a formal announcement for tapering could be in the November or December meeting.

Whether it is the fact that the taper has been dialed back or that the Fed have removed an element of uncertainty by explicitly talking about tapering; either way the market is in a happier place than it was at the start of the week.

Attention will now turn to the latest PMI data for clues over the health of the economy. Expectations are for both manufacturing and service sector activity to have picked up in September.

Where next for the Dow Jones?

The Dow Jones is extending the rebound from the weekly low and is approaching resistance at 34500 a key support turned resistance. A move over this level will expose the 100 sma at 34700 and negate the near term bearish bias. A move above the 50 sma at 3500 could see the buyers gain traction.

Dow chart

FX – USD declines, GBP rallies post BoE

The US Dollar is trading lower as investors continue digesting the Federal Reserve monetary policy announcement last yesterday.

GBP/USD is rallying after the BoE rate decision. The BoE, as expected kept interest rates on hold and bond purchases unchanged. The central bank voted 7-2 to keep bond purchases unchanged versus 8-1 at the last meeting. There was another BoE policy makers, Ramsden, who joined Michael Saunders and is nervous about rising inflation. The change to the vote lifted the Pound.

GBP/USD  -0.13% at 1.3640

EUR/USD  +0.04% at 1.1730


Oil eases but remains at two month highs

Oil prices are easing lower but trade near two month highs on the back of tight US supplies. Both Brent and US crude jumped 2.5% in the previous session following EIA crude oil stock pile data which revealed that stocks fell by 3.5 million barrels to 414 million the lowest level since October 2018.

The Gulf of Mexico production is returning, but slowly. Meanwhile, gas prices are still elevated offering a supportive structure for oil prices.

The weaker US Dollar was appearing to offer little support to oil prices.

WTI crude trades -0.15% at $72.25

Brent trades -0.1% at $75.4

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Looking ahead

14:30 US manufacturing & services PMI


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