US open: Stocks fall after strong data supports a hawkish Fed

US core PCE rises, meaning that inflation is still heading northwards fueling bets of a more hawkish Federal Reserve.

USA (2)

US futures

Dow futures -0.4% at 29222

S&P futures -0.35% at 3650

Nasdaq futures -0.27% at 11300

In Europe

FTSE -0.01% at 6910

Dax +0.6% at 12003 

US consumers keep spending

US stocks heading for a weaker open, after steep losses in the previous session and as investors digest the latest core PCE and consumer spending data.

Core PCE, the Fed’s preferred measure of inflation, keeps rising in August to 6.2% YoY. On a monthly basis personal spending rose 0.4%, up from 0.2%. Consumer spending accounts for around two-thirds of US economic activity.

The strong data raises the prospect of a more hawkish Federal Reserve. The market is currently pricing in a 61% probability of a 75-basis point rate hike, this is up from 56% prior to the inflation data.

Looking ahead, US consumer sentiment data is due to be released and is expected to show that sentiment rose to 59.5 up from 58.2. Stronger spending and an improved consumer morale suggests that the Fed could be emboldened to hike rates faster to rein in that spending to being inflation lower.

Corporate news:

Nike falls over 11% pre-market after the sportswear retailer warned that margins would be squeezed across the year.

FX markets – USD rises, EUR falls

The USD has resumed its rally after hawkish Fed speak and hotter than expected core PCE fuels bets of the Fed hiking rates more aggressively.

EUR/USD is falling as after strong than expected Eurozone inflation data. Eurozone consumer prices jumped to double digits at 10% YoY, an all-time high.

GBPUSD is falling after failing to hold onto earlier gains. The pound initially rose after UK Q2 GDP data showed that UK economy unexpectedly grew in the April – June period. The pound is rising against the euro.

GBP/USD -0.65% at 1.1080

EUR/USD -0.58% at 0.9766

Oil set for weekly gain

Oil prices are heading lower but are still set for weekly gains snapping a four week losing run, as investors turn their attention to the OPEC+ meeting next week, OPEC+ is widely expected to cut output to lift oil prices which have fallen around 30% from June highs.

Today oil prices are under pressure as the US dollar resumes its rally, boosted in part by higher-than-expected US inflation data.

WTI crude trades 1% at $80.70

Brent trades -1.26% at $88.50


Looking ahead

15:00 Michigan confidence


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