US pre-open: Stocks set for positive open as oil rallies

Stocks on Wall Street looked set for solid gains at the open as oil prices rose and investors continued to digest the implications of the European Central’s Bank latest stimulus measures.

At 1210 GMT, Dow Jones Industrial Average and S&P 500 futures were up 0.9% and 1%, respectively, while Nasdaq futures were 1.2% higher.

At the same time, West Texas Intermediate was up 2.6% to $38.83 a barrel and Brent crude was up 2% at $40.84.

The International Energy Agency said in its monthly report that there are signs oil prices “might have bottomed out” and there is now “light at the end of what has been a long dark tunnel”.

On Thursday, the European Central Bank slashed its main interest rate by 5 basis points to 0.00% and increased quantitative easing by €20bn to €80bn from April, which was more than the €10bn market participants had been expecting.

In addition, the central bank cut the deposit facility rate by 10bps to -0.40% and lowered the margin lending facility rate to 0.25% from 0.30%.

Stocks initially surged on the news but soon reversed course as ECB chief Mario Draghi said in the press conference that policymakers were concerned that pushing rates too low could impact balance sheets, denting prospects of further rate cuts.

“It’s amazing what the concept of an extra €20 billion of QE working its way into the markets on a monthly basis can do for confidence,” said Alastair McCaig, market analyst at IG.

“Expectations had been high, and to be fair the ECB delivered at the top of the range. Traders though are a cynical bunch, and the extent of stimulus measures was taken as a signal of how worried the ECB was about the current state of affairs in Europe, as opposed to how determined it was to help improve the outlook.”

The next big focus for investors will be the rate announcement by the Federal Open Market Committee on 16 March.

The Federal Reserve is widely expected to stand pat on rates but the announcement will be eyed for any clues on the path for interest rates.

In corporate news, Ulta Salon Cosmetics & Fragrance shares surged in pre-market trade after its fourth quarter numbers beat analysts’ expectations.

Regeneron Pharmaceuticals edged higher after the biotechnology company said its rheumatoid arthritis drug had met its primary endpoint and was superior to a competitor’s drug when it came to improving symptoms.

Still to come on the data front, the US import price index is at 1330 GMT.