US pre-open: Stocks to rise amid rate hike expectations
US stocks were set for a positive open on Tuesday amid expectations that the Federal Reserve will announce a 25 basis points rate hike this week.
At 1220 BST, Dow Jones Industrial Average and S&P 500 futures were up 0.3%, while Nasdaq futures were 0.2% firmer.
The Fed’s two-day policy meeting kicks off later in the day, with investors broadly expecting a hike.
According to CME’s FedWatch, market participants are expecting a 100% rate hike on Wednesday and an 83% probability for another hike by year end, in line with the Fed’s dot plots from June’s meeting.
Hussein Sayed, chief market strategist at FXTM, said: "The Federal Reserve may not seem very worried about growing tensions with the global trade dispute. So far there are no clear indications that global trade tensions are weighing on the US economy despite a couple of surveys showing that some businesses are considering reassessing their investment and hiring plans.
"As for the inflation threat, the latest 10% tariff on $200bn worth of Chinese goods is expected to have a minimal impact on prices, especially given the decline in the Chinese Yuan. However, this assessment will change if a 25% tariff is imposed on all Chinese imports, however the Fed won’t jump to conclusions at this stage.
"The most interesting part in this scenario is how the Federal Reserve sees the economy performing in 2019 and beyond. For 2019 it only takes one member to lower his or her interest rate projections to shift the median expectation to two rate hikes instead of three. Such a shift in the dot plot will be viewed as dovish and likely lead to further selling pressure on the dollar."
Meanwhile, investors were likely to continue keeping an eye on developments between the US and China following reports that China’s vice commerce minister Wang Shouwen said at a news conference on Tuesday that it was difficult to go ahead with negotiations at the moment and that the discussions would depend on the will of the US.
Political instability was also a concern following reports on Monday that Deputy Attorney General Rod Rosenstein was about to quit or be sacked. These reports were later dismissed by the White House, however, with Rosenstein due to meet Trump on Thursday.
In corporate news, Michael Kors was weaker in pre-market trade after confirming that it will buy Italian fashion house Gianni Versace in a $2.1bn deal.
Elsewhere, Comcast was likely to be in focus as it bought more than 30% of Sky shares after outbidding 21st Century Fox for the London-listed broadcaster over the weekend.
Oil stocks could well be on the rise as Brent continues on its upward trajectory, hitting a fresh four-year high above $82 a barrel.
On the data front, S&P Case-Shiller home prices are at 1400 BST, while the Richmond Fed manufacturing index is at 1500 BST.