US Futures Higher as Commodities and Banks Weigh in Europe

US futures are pointing slightly higher on Tuesday but are expected to remain volatile ahead of the open, in keeping with what we’ve seen already in Europe this morning.

European indices have rebounded a little following another rough start to the day but the underlying concerns remain which could continue to weigh in the short-term. We continue to see weakness in commodity markets which is showing little sign of abating, despite oil finding some relief so far today. Silver has also found some stability following its surge on Monday as it continues to show signs of being one of the outperformers in the commodity space in the coming weeks and months.

Another concern for investors continues to be the European banking sector as negative interest rates and rising non-performing loans put increasing pressure on profit margins and banks’ ability to meet capital requirements. With the banking crisis of recent years still fresh in the memory, there are real fears that the banks face big challenges this year. Moreover, the eurozone recovery – what little we are actually seeing – could be threatened by any renewed weakening in the banking sector and drying up of credit. This is just the latest in a long list of global economic headwinds that have weighed heavily on markets this year.

It’s going to be another relatively quiet day on the data side today, with US JOLTS job openings the standout release given the ongoing focus on the labour market. This is expected to remain at recent highs despite falling back very slightly from 5.431 million to 5.4 million. Investors will also have one eye on Janet Yellen’s testimonies in the coming days before the House Financial Services Committee and the Senate Banking Committee.

The Fed’s decision to raise interest rates for the first time in almost a decade in December has been criticised by some, especially in light of how the markets have behaved since. The Fed had previously hinted at a further four rate hikes this year, something that seems very unlikely at this stage. It will be interesting to see in the coming days whether Yellen sticks with these original forecasts or whether recent conditions have changed the central banks’ plans.