US stocks are poised to kick off on a positive note as investors shrug off further falls in oil prices and continue to factor in fresh stimulus measures soon for the moribund eurozone economy.
Late morning futures were indicating that the Dow Jones will open 65 points higher at 17,705 with the S&P 500 ahead seven points at 2,035. The Nasdaq is seen gaining 15 points to 4,185.
Expectations that the European Central Bank (ECB) will soon launch a full blown quantitative easing (QE) programme continues to mount. German newspaper Die Welt reports today that the ECB is far advanced in discussions about whether to embark on a sovereign bond buying programme and could take a decision at its 22 January meeting on whether to go ahead, citing Benoit Coeure, a top ECB policymaker.
According to Coeure, a member of the executive board of the ECB, Greece’s national election on 25 January would not influence the bank’s monetary policy path as it weighs up whether to begin printing money to buy sovereign bonds – so-called quantitative easing.
Meanwhile, RBS economists reckon that the Bank will be forced to boost its balance sheet to a massive €4.5 trillion in a bid to prevent deflation engulfing the eurozone.
That figure is the most aggressive forecast issued so far by any major bank and implies a ECB QE programme of at least €2.3trn, two or even three times the level suggested so far by ECB officials.
Oil prices will be another major factor affecting sentiment this afternoon. Jasper Lawler, analyst at CMC Markets, says the ever-increasing downward pressure on crude oil prices has stock markets worried over what the lower demand worldwide for ‘black gold’ means for global growth.
Crashing oil prices – down a further 5% yesterday – led to lower stocks on Monday, with the Dow Jones giving up 97 points, while the S&P 500 fell 0.8% and the Nasdaq slid 0.8%. US crude futures this morning remained under pressure, sliding another 3% to $44.50/barrel at one stage this morning before edging up to $44.92/barrel.
This morning’s UK inflation data will probably attract investor interest in the US. The reading, which shows UK inflation in December fell to 14-year low of 0.5% – will be seen by investors as yet more evidence global stock markets that they still have plenty of time left to benefit from zero-bound interest rates.
The US fourth quarter earnings season kicked off yesterday with aluminium giant reporting better than expected fourth quarter earnings after-hours. Its shares are expected to open higher as a result. Companies on the runway today include KB Home, CSX Corp and GameStop report earnings on Tuesday.
The big focus for this week, however, will be fourth quarter numbers from the big banks, with Bank of America, JP Morgan Chase, Goldman Sachs, Wells Fargo and Citigroup all due to report.
More broadly, Amazon.com is likely to be in focus following a Golden Globe award for best TV comedy for its show ‘Transparent’. Lawler says Amazon’s Golden Globes win is another sign of the growing role for new media tech companies in Hollywood following previous wins for Netflix for its own show ‘House of Cards’.