US Equity Futures Power Higher as Bond Yields Steady, Dollar Retreats

February 26, 2018

New York (Feb 26)  U.S. stocks are set to extend last week's rally at the start of trading Monday as investors take comfort from stabilizing bond yields ahead of three key central bank speeches and a important set of inflation readings in Europe and the United States.

Contracts tied to the Dow Jones Industrial Average were marked 172 points higher from Friday's close, indicating an opening bell gain of 180 points, while those tied to the broader S&P 500 were seen 12 points, or 0.44%, to the upside ahead of not only Powell's first testimony but also the January reading of the Fed's preferred inflation gauge, the personal consumption expenditures index, on Thursday.

The gains come as investors prep for the first Humphrey Hawkins testimony of newly-appointing Federal Reserve chairman Jerome Powell to the House Financial Services and Senate Banking Committees starting on Tuesday. Beyond the macro data, markets will digest a series of fourth quarter earnings from the U.S. retail sector this week, with numbers from Macy's Inc. (M - Get Report) , Lowe's Companies Inc. (LOW - Get Report) , Gap Inc (GPS - Get Report) , Nordstrom Inc (JWN - Get Report) , Kohl's Companies (KSS - Get Report) and J.C. Penney Companies Inc (JCP - Get Report) all expected over the next five days.

Investors will also be focused on European Central Bank President Mario Draghi's testimony to European lawmakers later today in Brussels as well as a speech by Bank of England Governor Mark Carney later this week as global government bond yields ease -- benchmark U.S. 10-year Treasury notes were marked at 2.86% during European trading and German bunds hit a one-month low of 0.64% -- and the dollar retreats from its recent multi-week highs amid signals from central bankers in Europe and the United States that rate hikers are likely to remain gradual for many months to come.

That message not only helped Wall Street end on a high note last week, but also boosted stocks in Asia overnight, where the region-wide Asia ex-Japan index gained 0.68% into the close of trading and Japan's Nikkei 225 jumped 1.2% to a three-week high of 22, 153.63 points. It may also be cemented with inflation data from Eurostat, the region's official statistics office, for the month of February on Thursday.

The Stoxx Europe 600 index, the region's broadest measure of share prices, was marked 0.48% higher by mid-day in Frankfurt, paced by a 0.36% gain for the DAX performance index in Germany and similar percentage gains for markets in France and Italy, Britain's FTSE 100 added around 0.32% higher in the opening hour of trading in London, with the advance tempered by a stronger pound, which edged past the 1.4060 mark against the U.S. dollar in overnight trading ahead of Prime Minister Theresa May's key Brexit speech later today and a competing version on Britain's EU exit from opposition Labour Party leader Jeremy Corbyn.

Global oil prices slipped modestly in Monday trading, easing from a three-week higher after Saudi Arabia's oil minister hinted that OPEC may not revisit its agreement on production cuts, which are taking 1.8 million barrels from the market each day, until at least 2019.

"A study is taking place and once we know exactly what balancing the market will entail, we will announce what is the next step," Khalid al-Falih said during a visit to India. "The next step may be easing of the production constraints ... my estimation is that it will happen sometime in 2019. But we don't know when and we don't know how".

Brent crude prices for April delivery, the global benchmark, were seen 20 cents lower from their Friday close at $67.11 per barrel while WTI contracts for the same month were marked 12 cents lower at $63.43 per barrel.

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U.S. Equity Futures Power Higher as Bond Yields Steady, Dollar Retreats


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