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31.03.2023 01:55 PM
US premarket trade on March 31: stocks to end month on positive note

US stock index futures extended gains and hit new weekly highs along with European ones. Traders are now focused on the Fed's preferred gauge to measure inflation. They are hoping to recieve some clues about the future of the monetary policy. If the index declines, this will most likely lead to another rally in stock markets, while rising inflationary pressure will exert pressure on markets.

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S&P 500 futures rose by 0.3%, while Nasdaq-100 futures jumped by 0.4%. Europe's STOXX 600 index also showed strong gains.

As noted above, the focus of market participants is on the so-called core PCE price index. The figure is estimated to show a continued rise in inflation last month. Yesterday, Fed members expressed the need to keep monetary policy tight to curb inflation, even depite the failures of three US banks. Federal Reserve Bank of Boston President Susan Collins said tightening was urgently needed. The Fed could take an even more aggressive stance if inflationary risks persist, Richmond Federal Reserve bank president Thomas Barkin noted.

Likewise, the US dollar strengthened today, thus recouping some of its early losses. Treasury yields stabilized at the end of the quarter after sharp swings. Investors continue to express concerns over the banking sector, but they are not as high as in early March. Two-year and ten-year Treasury yields came in about 4.13% and 3.55% respectively.

Meanwhile, risks are being tilted to higher inflation and rates, further exacerbating the yield curve inversion that is a worrisome signal of a looming economic recession. According to Citigroup equity strategists, investors' attention has shifted from risks of higher rates to risks of a recession. In this regard, US stocks look more attractive than European ones.

Meanwhile, inflation in the euro area has eased, while core consumer prices have hit another record high. This makes it more challenging for the European Central Bank to choose the future course of interest rates. Consumer prices jumped by 6.9% in March from a year earlier, down from 8.5% in February and less than the 7.1% median estimate. Core inflation stood at 5.7%.

As for other markets, oil prices have edged higher over the week amid ongoing disruption to Iraqi exports. Gold has remained almost unchanged. Bitcoin is closing out its best quarter since the three months ended March 2021 with a roughly 70% gain.

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From a technical point of view, demand for risky assets persists. The S&P 500 index will continue its uptrend if bulls manage to push the quote above $4,064. In this case, the way to $4,091 will open. Then, buyers will need to take contol of the $4,116 mark, thus confirming a bull market. In case of a downward move amid a lack of driving forces and lower demand, buyers will have to make every effort to regain control of the market at around $4,040. If the quote breaks through the level of $4,010, the index will plunge to $3,970.

Jakub Novak,
Especialista em análise na InstaForex
© 2007-2025
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