Opening Bell: Futures Gain, Europe Stocks Drop As ECB Eyed; U.S. Dollar Rallies

 | Jun 09, 2022 07:17

  • New Shanghai lockdown strikes an ominous note
  • Treasury yields slip but remain above 3%
  • Bitcoin recovers
    • h2 Key Events/h2

    US futures on the Dow Jones, S&P 500, NASDAQ 100, and Russell 2000 were trading higher ahead of the New York open on Thursday. European stocks slid a quarter of a percentage point when markets opened there as traders await the ECB's interest rate decision which will be released today at 7:45 a.m. EST (1145 GMT).

    Gold was weaker on dollar strength.

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    Earlier today, US contracts fell on news from Asia that Shanghai had announced a new coronavirus lockdown to begin on Saturday, after having eased some restrictions last week. The latest COVID restrictions upended recent bullish declarations that a global recession is less likely as supply chains are expected to return to normal.

    However, futures have since recovered and are now pointing to a positive Wall Street open.

    Meanwhile, the STOXX 600 Index fell for the third day, with consumer products and basic resources, but has rebounded from session lows.

    Until now, traders were wagering that the ECB will raise rates 75 basis points by September, beginning with the first of three 0.25% increases in July. However, current pricing suggests traders now expect an extraordinary 50 basis point bump in September. Last week the Eurozone reported annual inflation was running at 8.1%, more than four times the central bank's 2% target. Australia's and Canada's rare 50 bps hikes underscore the view that the ECB may have to catch up with the global economy.

    Most Asian indices closed in negative territory on Thursday, as a tech rally reinforced the selloff that pushed the country's four largest lenders to multi-month lows. Although higher rates enable banks to increase their profit margins, growing concerns of a housing market crash, which would hurt bank profits, spooked investors there.

    US stocks fell on Wednesday, ending a two-day rebound. The S&P 500 closed near the session bottom, and all sectors—excluding Energy which closed up 0.22%—declined. Matching up with Australia's housing scare, the S&P Real Estate dropped 2.4%, underperforming.

    The S&P has been trapped in the same approximate 100-point range between 4075 and 4175 for almost two weeks. There is a technical reason for this churning.