Dow futures -0.62% at 31850
S&P futures -0.5% at 4005
Nasdaq futures -0.93% at 12450
FTSE -0.94% at 73283
Dax -0.2% at 12960
Euro Stoxx -1.7% at 3670
Jobless claims fall
US stocks are starting the new month on the back foot after steep declines across August. It looks like more of the same as fears over rising interest rates and slower growth continue to plague investors.
Stocks and bonds are selling off while the USD benefits from hawkish Fed expectations and safe haven flows. With corporate earnings now a distant memory, the market is firmly focused on the slowdown effect of hiking rates.
Adding to the downbeat mood, rising COVID cases in China and widening lockdown measures mean supply chain disruptions worries are returning. Chinese manufacturing PMI also unexpectedly contracted for a second straight month.
US jobless claims were stronger than expected, falling to 232k, down from a downwardly revised 237k and well short of the 248k forecast. The stronger than forecast jobless claims suggest that economic slowdown concerns still haven’t reached the labour market.
Attention will now turn to US ISM manufacturing data which is expected to show that the sector expanded again in August.
It’s worth noting that the volatility index, often referred to as the fear gauge, has risen for a third straight week, although at 26.70 remains a reasonable distance from the key 40 level.
Nvidia falls over 4% pre-market & Advanced Micro Devices falls 2.4% after US officials tell them to stop exporting computing chips for AI work to China.
Disney rises on reports that the firm is exploring the idea of membership programs that offer discounts or perks to customers to encourage higher spending on streaming.
Where next for the Dow Jones?
The Dow Jones is extending its rebound lower from 34300 hit mid-August. The price falls below the 200 & 50 sma, which along with the bearish RSI, supports further downside. Support can be seen at 31000 and 30650, the May low. A break below here could bring 30000 back into the target. On the flip side, buyers could look for a move over the 50 sma at 32200 to open the door to 33500, the May 30 low.
FX markets – USD rises, GBP drops.
The USD is powering higher, rising for a second straight day. Hawkish Fed comments have overshadowed weaker than forecast ADP payroll data yesterday. USD/JOY rose to a 24-year high in early trade on central bank divergence
EUR/USD is falling after booking solid gains yesterday. The euro found some support from hawkish ECB expectations after inflation hit a record 9.1%. However, today’s manufacturing PMI confirming contraction in August is raising recession fears.
GBP/USD is in freefall as recession fears mount. UK manufacturing activity weakens to a level last seen in May 2020, in the depths of the pandemic. The PMI dropped to 47.3 from 52.1 in July. However, this was slightly above the initial reading of 46.
GBP/USD -0.41% at 1.1595
EUR/USD -0.37% at 1.0004
Oil keeps on falling
Oil prices are falling for a third straight day, dropping to a weekly low as negative forces keep hammering the price lower. After losing over 5% this week, the price is moving dangerously close to the August low at $85.
More COVID lockdown restrictions in China add to the already intense global economic slowdown fears, hurting the demand outlook. An unexpected contraction in Chinese manufacturing activity highlights how fragile the recovery is in China, the world’s largest oil importer.
Meanwhile, the supply side a receiving a boost from the prospect of Iranian oil soon returning to the market. Comments from French President Macron raised hopes that the US – Iran nuclear deal could be revived within days.
With the OPEC+ meeting next week, any fall in oil prices could be short-lived. Should Saudi Arabia push a cut to oil output, $100 per barrel could soon be back in focus.
EIA stockpile data is due later today.
WTI crude trades -2.9% at $88.96
Brent trades -3% at $95.15