US open: Futures mixed as inflation fears return

US stocks point to a mixed start after US CPI shot higher to 5% YoY. Inflation fears have returned driving the rotation into value.

USA (2)

US futures

Dow futures +0.2% at 34565

S&P futures +0.1% at 4225

Nasdaq futures -0.34% at 13782

In Europe

FTSE +0.18% at 7094

Dax -0.14% at 15571

Euro Stoxx -0.17% at 4090

Learn more about trading indices

Tech stocks hit by rising rate concerns

US stocks are pointing to a mixed start after inflation shot up by more than expected.

CPI jumped 5% YoY in May, ahead of the 4.2% in April and ahead of forecasts 4.8%.

Core CPI rose 3.8% YoY in May, up from 3% in April and ahead of the 3.4% forecast.

Inflation is rising rapidly as the economy reopens after the pandemic restrictions. Whilst this is supposed to be the peak in CPI, investors have been fretting that a sharp and sustained rise in inflation could prompt the Fed to slow its pace of asset purchase or even begin to signal towards a rate rise. This data is fueling those fears further and driving the rotation into value

High growth US tech stocks which are most sensitive to changes in interest rates are trading lower pre-market. The tech heavy Nasdaq is under performing its peers on Wall Street. Meanwhile value stocks most closely tied to the improving economic health of the economy are back in favor boosting the Dow Jones.

Jobless claims

Initial jobless claims fell to a fresh pandemic low last week, falling to 376,000, down from 385,000 the week before and just slightly above forecasts of 370,000. The data suggests that the recovery in the labour market continues as the economy continues re-opening.

Equities

GameStop is likely to be in focus and trades around 6% lower pre-market despite beating estimates in Q1 earnings. GME announced after the close that it intends to offer more shares and that regulators are looking into the trading of its stock.


Where next for the Dow Jones?

The index has fallen through its month old ascending trendline yesterday and trades between its 50 & 100 sma on the 4 hour chart. Buyers will be looking for a move over 34600 the 50 sma in order to target a move towards 34850 horizontal support and bring the all time high of 35000 back into play. A move below 34450 the 100 sma could support a more negative bias and help drive the price towards 34250. A break below here could spark a deeper selloff.

FX – USD edges higher, ECB keeps rates on hold

The US Dollar rises after higher than forecast inflation data driving bets of the Fed moving to tighten policy sooner.

GBP/USD is under performing its major peers as EU -UK tensions remain elevated. Talks between the two sides yesterday failed to result in a breakthrough. Instead, the EU threatened trade tariffs sending the Pound lower. Covid cases continue to rise.

EUR/USD as expected the ECB kept rates on hold and the PEPP unchanged at €1.85 trillion. The ECB sees PEPP purchases continuing to be conducted at a significantly higher pace than the start of the year. The dovish stance has been confirmed, EUR/USD was unmoved. Attention will now turn to Christine Lagarde’s press conference and the quarterly projections.

GBP/USD -0.1% at 1.4102

EUR/USD    -0.1% at 1.2170


Oil shrugs off a rise in fuel inventories

Oil prices are edging quietly higher after recording mild losses in the previous session amid concerns over a weak start to the US summer driving season. Inventory data by the EIA for the US revealed that stockpiles fell for an 11th consecutive week. However, fuel inventories rose steeply pointing to weak consumer demand.

Even so with traffic levels on the rise, and vaccine programmes continuing at a rapid pace the disappoint has been shrugged off rapidly and the bullish uptrend remains in tact.

US crude trades +0.13% at $69.90

Brent trades +0.27% at $72.13

Learn more about trading oil here.

The complete guide to trading oil markets


Looking ahead

18:00 BoC Lane speaks


How to trade with FOREX.com

Follow these easy steps to start trading with FOREX.com today:

  1. Open a Forex.com account, or log-in if you’re already a customer.
  2. Search for the market you want to trade in our award-winning platform.
  3. Choose your position and size, and your stop and limit levels.
  4. Place the trade.


More from Indices

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.