Higher Open Likely For US Markets: Oil Slumps

Higher open expected for the U.S. markets Tuesday after the main stock index futures stood higher on Tuesday morning.

At 6:45 a.m. ET, Dow Jones futures showed a positive open of more than 100 points. Futures on the S&P and Nasdaq were also up.

The triple-digit rise on Dow Jones is an indication of the market focus shifting to the central bank’s two-day meeting from Tuesday.

Investors are monitoring whether policymakers at the central bank will do the groundwork for a rate cut later this year.

“If the Fed is easing, it certainly means that they expect (that) the U.S. economy ... is slowing. If the U.S. economy is slowing, then very likely the global economy will be feeling that ... pain as well,” said Steve Cochrane, chief Asia Pacific economist at Moody’s Analytics told CNBC.

On the data front, housing starts, and building permits for May will come up at 8:30 a.m. ET.

Engineering company Parsons will report its latest results before the bell.

Asian markets up

In the Asia Pacific markets, mainland China stocks jumped. The Shanghai Composite soared marginally. Hong Kong’s Hang Seng index added more than one percent at the final hour of trading.

South Korea’s Kospi was up 0.38 percent ASX 200 in Australia gained 0.6 percent. In Japanese stocks, the Nikkei 225 slipped 0.72 percent while the Topix index plunged 0.72 percent.

European stocks made a comeback on Tuesday after a reassuring speech by European Central Bank President Mario Draghi. He suggested the ECB will intervene with more stimulus if inflation is not picking up. The stimulus may be through rate cuts or asset purchases.

The pan-European Stoxx 600 climbed 0.4 percent. Basic resources stocks led gains with a 1.3 percent rise, while only a few sectors remained in the red.

Oil market down

Oil prices crashed for a second day on Tuesday on escalating worries that global economic growth is being hit by the U.S.-China trade war, although tensions in the Middle East are propping up prices.

Brent crude futures shed 0.7 percent to $60.54 a barrel by 0701 GMT. The U.S. West Texas Intermediate (WTI) crude futures lost 0.5 percent at $51.65.

“The oil market is in a rut and desperately needs some robust economic data to get it out of this funk,” wrote Stephen Innes, managing partner at Vanguard Markets in Bangkok.

Further pressure on the oil market came from the U.S. energy department that said the shale oil volumes would hit a record in July.

Gold up

Gold prices jumped Tuesday, as the dollar fell from multi-week highs ahead of the U.S. Federal Reserve’s policy meeting.

Spot gold gained 0.5 percent to $1,345.81 per ounce as of 0643 GMT. The U.S. gold futures jumped 0.5 percent to $1,349.80 an ounce.

“The overall sentiment in the gold markets is positive. There are expectations that the Fed will cut interest rates, which has weakened the dollar and will be the main driver for prices,” commented Helen Lau, an analyst at Argonaut Securities.