Global Stocks Edge Higher As Amazon Offers A Distraction From Facebook

US indices closed marginally higher overnight as Wall Street bounced back from Monday’s selloff, leaving Facebook to languish on it own. Whilst the Facebook scandal shows no signs of disappearing, putting the social media giants loses at over 10% across two sessions, tech stocks on the whole performed well, grateful for the distraction provided by Amazon, which overtook Alphabet as the second largest US company.  Whilst the US session was short on reasons to cheer, the fact that stocks inched higher was good enough to send Asian markets northwards and encourage a positive open in Europe.

Geopolitical tensions in the Middle East have boosted the price of oil to a three-week high overnight. A rally in crude of over 2.7% will keep trader’s eyes on energy stocks with gains expected on the opening bell.

UK wage data to show the return of “good” inflation?
This week continues to be a pivotal week for the pound. First the Brexit transition deal pushed the pound to close over $1.40. An easing in inflation, below 3% for the first time in 5 months raised concerns that the BoE will hold off on any Spring time rate rise and now UK earnings growth is under the spotlight. All of this ahead of some much-needed clarity from the BoE on tomorrow

Today, high impacting data continues to flow, as investors look to wage growth figures. Today’s reading will give traders the opportunity to assess the extent to which the squeeze on the consumer is easing, if at all. Inflation was at 3% in January. Wage growth in the three months to January is expected to have increased 2.6%, highlighting the struggle of falling wages in real term faced by households. Yet when compared to February’s inflation print of 2.7% or 2.4% for core inflation, suddenly the picture is much more palatable for the U.K. consumer.

Any signs of stronger than expected earnings growth is likely to send the pound comfortably back over $1.40 towards $1.4110. This would indicate that “good” inflation is on the rise, as opposed the “bad” pound devaluation, induced inflation that the BoE has been battling against since the Brexit referendum. But let’s not forget, wage growth has shown itself to be a tough nut to crack (just think US) so should it fail to materialise, it will almost certainly dampen rate hike expectations knocking some wind out of sterling. GBP/USD could fall back to $1.39.

Fed to hike 3 times or 4 this year?
We expect traders to be airing on the side of caution in trading on Wednesday, as eyes remain firmly fixed on the Fed rate announcement and press conference later today. The big question is not whether the Fed will hike today, that is as good as certain; however, 3 hikes or 4 is still a dividing question.

It will be worth keeping an eye on bond yields, any signs of a more aggressive path to tightening by the Fed could push yields higher. Since high yields were a catalyst to last month's heavy sell off, traders are going to be wary of a repeat performance.

Opening calls
FTSE to open 7 points higher at 7069
DAX to open 43 points higher at 12350
CAC to open 10 points higher at 5262