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US futures slip, Rubrik, UBS buyback - what's moving markets

US futures slip, Rubrik, UBS buyback - what's moving markets
Financial Expert Economy 03 April 2024

Wall Street looks set to trade lower Tuesday as traders factor in the reduced likelihood of rate cuts in the first half of the year after strong economic data. Rubrik plans a IPO, while UBS announces a new share buyback program.

1. Futures lower; Fed rate cut delayed?
U.S. stock futures traded largely lower Tuesday, continuing the previous session’s weakness on concerns Federal Reserve rate cuts will be delayed until the second half of the year.

By 04:25 ET (09:25 GMT), the Dow futures contract was 105 points, or 0.3%, lower, S&P 500 futures dropped 2 points, or 0.1%, while Nasdaq 100 futures rose by 5 points, or 0.1%.

The major indices closed largely lower Monday, with the Dow Jones Industrial Average dropping 240 points, or 0.6%, and the broad-based S&P 500 index dropping 0.2%. The tech-heavy Nasdaq Composite bucked the trend, climbing 0.1%.

The weakness followed data showing strength in the U.S. manufacturing sector, which cast doubts on the likelihood of a rate cut from the Federal Reserve in June.

There is more economic data to digest Tuesday, including job openings and durable orders, both for February, ahead of Friday’s widely-watched payrolls report for March.

2. Fed rate cut expectations pushed back
The release of strong U.S. manufacturing activity data on Monday has seen traders push back expectations of the Federal Reserve's first interest rate cut this year.

The CME's FedWatch tool now factors in 61.3% odds of a Fed rate cut in June, down from about 70.1% probability a week ago.

This has benefited the U.S. currency, with the dollar index, which measures the currency against its main rivals, trading just below the over 4-month high of 105.07 seen on Monday.

This strength is best illustrated against the Japanese yen, with the USD/JPY pair trading just below the 152 level that last prompted intervention from the Japanese authorities in 2022.

This yen weakness has come despite the Bank of Japan's first interest rate hike since 2007 last month, prompting Finance Minister Shunichi Suzuki to reiterate, earlier Tuesday, that he wouldn't rule out any options to respond to disorderly currency moves.

3. Rubrik announces IPO plans
The IPO market is picking up, after Rubrik announced plans on Monday to list its shares, adding to a growing wave of companies turning to capital markets after a two-year lull.

The cybersecurity platform is set to follow the recent debuts of Reddit (NYSE:RDDT) and Astera Labs (NASDAQ:ALAB).

After a record IPO year in 2021, soaring inflation and rising interest rates resulted in a drying up in tech investing in the public and private markets.

The company’s revenue in the fiscal year ended January rose about 5% to $627.9 million, but its net loss widened to $354.2 million from $277.7 million a year earlier.

Rubrik plans to trade on the New York Stock Exchange under the ticker symbol “RBRK.”

4. UBS buyback shows confidence
UBS (SIX:UBSG) is emerging from the turmoil surrounding its merger with troubled rival Credit Suisse in a relatively strong position, even with doubts remaining over the accuracy of the latter’s financial reports.

UBS reported last week in its annual report that there is a risk that "a material error" may not be detected by UBS and could result in a material misstatement to Credit Suisse's reported financial results.

However, the Swiss banking giant showed confidence in the future by announcing Tuesday a new share buyback program of up to $2 billion, with the scheme starting on Wednesday.

The scheme follows the 2022 buyback, where UBS bought back 298.5 million of its shares - equivalent to 8.6% of its stock - for $5.2 billion.

Before the deal was announced, UBS had already repurchased nearly 1.2 billion Swiss francs ($1.32 billion) worth of its stock.

5. Crude gains on strong manufacturing activity data
Oil prices rose Tuesday, boosted by signs of improving demand in China and the U.S., the world's biggest oil consuming nations.

By 04:25 ET, the U.S. crude futures traded 1.3% higher at $84.81 a barrel, while the Brent contract climbed 1.2% to $88.48 per barrel.

Data released earlier this week showed March manufacturing activity in China expanded for the first time in six months and in the U.S. for the first time in well over a year, which should translate to rising oil demand from these two economic giants.

At the same time, fears of more supply disruptions from the oil-rich Middle East grew following a fatal Israeli strike on Iran's embassy in Syria, marking an escalation in the war in Gaza between Israel and Hamas, which is supported by Iran.

The Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, will hold an online meeting of its Joint Ministerial Monitoring Committee on Wednesday to review the market.

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