Early Morning Call: Europe, US to open up; AUD/USD still rising; iron ore sinks

European indices outlook

Europe indices opened in positive territory for a second straight day.

Yesterday, the FTSE 100 ended the session 1.50% higher among the best performers in the region. In France, the CAC 40 recorded smaller gains as the latest parliamentary election clouded the political horizon.

President Macron’s party lost its absolute majority in the Palais Bourbon, putting his reform agenda at risk, and he will have to seek alliance with members of the opposition, most likely ex-President Sarkozy’s Les Republicains party.

APAC outlook

APAC indices rebounded overnight. Japan’s Nikkei led gains, closing 1.98% higher. Australia’s ASX 200 rose by 1.41%.

In Australia, Reserve Bank of Australia (RBA) Governor, Philip Lowe, signalled more rate hikes are to come as price pressures are continuing to build both globally and domestically. Inflation in the country is now expected to reach 7% by the end of the year, up from a previous forecast of 6%. "At the moment, the decision we will take is either 25 or 50 bps again at the next meeting," Lowe said when questioned on it, playing down the chance of 75 basis point (bps) hike.

US markets

US markets have reopened after a long weekend and are expected to show gains.

Last week major indices recorded their 10th week of declines. The S&P 500 lost 5.8% the previous five sessions, posting its largest weekly loss since March 2020.

Traders are waiting for existing home sales data, forecast to fall of around 5% in May on a month-on-month basis, in a context of rising interest rates that have a direct impact on the housing market.

Investors will also keep an eye on Jetblue Airways shares at the open, after it improved its offer for Spirit Airlines to $33.50 per share, trying to create the fifth-largest US airline. Spirit said its board will conduct an evaluation of Jetblue’s offer and update its shareholders at the end of the month.

UK outlook

Here in the UK, easyJet says it has entered into conditional arrangements with Airbus for the supply of 56 A320neo aircrafts, and the conversion of 18 A320neo to the same number of A321neo aircrafts.

Commodities

On the commodity markets, there is growing pessimism over iron ore demand in China. The metal plunged by more than 8% yesterday, dragging iron ore producers in its wake.

Watch out for Rio Tinto and BHP at the open in London, the two stocks are trading near six-month lows.

Oil prices continue to pare last week's losses, as traders seem now more concerned by tight supplies than recession dampening demand.