US pre-open: Stocks seen flat as investors scale back rate hike expectations

US futures pointed to a broadly flat open on Wall Street as market participants scaled back expectations of the next rate hike by the Federal Reserve following Friday’s much weaker-than-expected economic growth figures.

At 1110 BST, Dow Jones Industrial Average futures were up just 0.1%, while S&P 500 and Nasdaq futures were steady.

At the same time, oil prices retreated. West Texas Intermediate was down 1.1% at $41.16 a barrel and Brent crude was 1.2% lower at $43.02.

On Friday, the first release of US second-quarter gross domestic product showed an annual growth rate of 1.2% compared to 0.8% growth in the first quarter, missing expectations of a 2.6% increase. First-quarter growth was revised down from a previous estimate of 1.1%.

Societe Generale said: “The implied probability of a 25 basis points increase by the Fed by December plummeted to 36% on Friday, from 49% before the FOMC meeting last Wednesday. Was this all due to the 2Q GDP report in the rear view mirror? That looks exaggerated to us, and with month-end flows behind us, we caution against a reversal this week of last Friday’s move.”

In corporate news, Tesla Motors and SolarCity were likely to be in focus following a press report that they could announce a merger as early as Monday.

Investors were also likely to be digesting comments from New York Federal Reserve president William Dudley, who said at a central bankers’ conference in Bali that markets should not rule out a rate hike this year.

He said market participants might not be giving sufficient weight to the possibility that economic growth might outperform policymakers’ expectations.

Indeed, financial conditions might ease or the risks from Brexit and international developments fade away, he said.

"If such events were to occur, this might necessitate a faster pace of adjustment. For these reasons, I think it is premature to rule out further monetary policy tightening this year," Dudley said.

On the macroeconomic calendar, US ISM manufacturing and construction spending are due at 1500 BST.