US open: Inflation fears ease, Tesla drops

US futures

Dow futures +0.42% at 36246

S&P futures +0.41% at 4702

Nasdaq futures +0.51% at 16275

In Europe

FTSE -0.04% at 7341

Dax +0.25% at 16141

Euro Stoxx +0.25% at 4380

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Stocks rebound ahead of retail sales focus this week

US stocks are pointing to a mildly higher start extending the rebound from Friday after booking the first weekly decline in 6 weeks.

Last week stocks lost ground after inflation data shocked the market jumping to a 3 decades high and prompting speculation that the Fed could move sooner to raise interest rates. Data on Friday showed that consumer sentiment dropped to a decade low owing in part to the rise in prices.

Following the consumer sentiment data, attention will be firmly on US retail sales tomorrow to see whether the decline in consumer morale is being reflected in retail sales. Up to now retail sales have remained relatively buoyant rising 0.7% MoM in September. Expectations are for a 1.1% increase in sales in October. Weaker retail sales would suggest that higher prices are not only impacting consumer confidence but also consumer spending. Retailers are also due to report across the week with the likes of Walmart, Target and Macy’s are all due to release earnings this week.

Upbeat China data is helping to buoy the mood in the market. Chinese retail sales and industrial output both came in ahead of expectations, calming fears over a slowdown in the second largest economy.

Looking ahead the virtual meeting between President Biden and Chinese leader Xi Jinping will provide some distraction for the markets until retail sales data tomorrow. The leaders of the two largest economies in the world are expected to discuss trade and Taiwan among other topics.

Tesla carries on falling

In corporate news Tesla trades 2% lower pre-market as Elon Musk continues to sell out of his position. Tesla dived over 15% last week on a combination of factors sparked by a Tweet from Musk asking whether he should sell out of 10% of his holdings.

Where next for S&P 500?

The S&P500 is extending its rebound from 4630 pushing above thew 50 sma on the 4 hour chart and heads towards 4720 and fresh all time highs. The RSI supports further gains whilst it remains out of overbought territory.  It would take a move below 4630 last week’s low and the 100 sma for the sellers to gain traction towards 4550 the September high.

FX – USD eases lower, GBP recovers amid Brexit optimism

US Dollar is edging lower but still remains near 16-month high. Weaker US consumer confidence knocked demand for the greenback at the end of last week. Investors are waiting for the next catalysts to drive USD.

GBP/USD is rebounding from a yearly low. Encouraging headlines surrounding the post-Brexit trade talks with the EU is helping sterling recover and capitalize on the weaker USD. Brexit secretary Lord Frost said that there has been a change of tone in talks and both sides are committed to finding a solution to the Northern Ireland border issues.

 

Oil set for weekly decline

Oil prices have kicked off the week on the back foot, extending losses from the past three weeks. Weighing on the price of oil are a combination of factors including a stronger US dollar, in addition to expectations that the Biden administration could release strategic reserves in an attempt to bring fuel prices down and inflation, which hit a 3 decade high in September of 6.2%.

Rising COVID cases are adding pressure to the price of oil as well. Holland announced lockdown restrictions at the end of last week and Austria have also introduced lockdown restrictions for the unvaccinated.

Finally the Baker Hughes rig count which is considered an early indicator of future output rose by six to 556, the third straight weekly rise.

 

WTI crude trades -1.6% at $78.72

Brent trades -1.64% at $80.40

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Looking ahead

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