US open: Inflation fears, tech selloff continues
Fiona Cincotta May 11, 2021 8:51 AM
Tech looks set for another crushing session. The Nasdaq tanked -2.5% in the previous session and is set for a further -1.7% decline on the open. Chinese PPI rises at fastest pace in 3 years fueling inflation concerns.
Dow futures -0.5% at 34595
S&P futures -0.9% at 4151
Nasdaq futures -1.7% at 13138
FTSE -2.5% at 6947
Dax -2.4 at 15038
Euro Stoxx -2.4% at 3932
Inflation fears hit stocks
The selloff in tech is set to continue following on from weakness in Asia and Europe. Inflation concerns drove a rotation out of high growth tech stocks in the previous session and that is showing no signs of easing up.
Chinese PPI data overnight spooked the markets further as factory gate inflation came in ahead of forecasts at 6.8% year on year, the fastest rise since 2017.
The data comes ahead of tomorrow’s US CPI. Whilst the Fed have insisted that they view rising inflation as transitory, surging commodity prices are making the market question such a position.
There are several Fed speakers who could calm market nerves still ahead of tomorrow’s CPI release.
Tech sell off continues
The Nasdaq fell -2.5% in the previous session and looks set to under perform again with the futures pointing to a an additional -1.7% decline of the open. Rising inflation concerns are feeding the rotation out of growth into value. The Dow futures are heading for a milder 0.4% loss. However, there could be more to this move. The tech stock are sitting a lofty valuations and also look vulnerable to regulatory risk going forwards. Yesterday Citi downgraded both Facebook & Amazon to neutral from buy.
Just days after the shocking weak non-farm payroll report, JOLTS jobs openings are expected to show 7.5 million vacancies, almost at the record high seen in 2019. This highlights the discord in the jobs market amid a mismatch of skills and openings or availability and openings.
Where next for the Dow Jones?
The Dow futures are heading lower, extending losses from the previous session, edging away from the recently hit all time high over 35000. The Dow still trades above its 50 sma and its multi-month ascending trendline and is testing its 20 sma at 34600. The move lower has bought the RSI out of overbought territory. The uptrend remains intact whilst the price holds above 34250. A move below 37000 could see the sellers gain traction for a deeper selloff towards 33250. On the upside a break above 35000 could see new all time highs reached.
FX – EUR rises on jump in German economic sentiment
The US Dollar is trading lower despite rising inflation concerns.
EUR/USD outperforms in the G10 space amid upbeat German ZEW Economic Sentiment gauge. The index jumped to 84 in May, up from 70.7 in April and well ahead of the 71 forecast. The improved outlook comes as the vaccination programme ramps up in the country and as covid cases are falling. Roughly 30% of EU residents have had a least one jab.
GBP/USD +0.18% at 1.4145
EUR/USD +0.31% at 1.2167
Oil eases back as pipeline operations to return, India's covid crisis hits demand
Oil is trading lower amid the realization that the Colonial Pipeline disruption will most likely be a temporary knock to operations. Expectations are for operations to start ramping up today and full scale operation be in place by the end of the week.
The ongoing covid crisis in India is adding pressure to the price of oil. Indian oil refiners are cutting output and crude oil imports as surging covid cases have resulted in a drop in fuel consumption. Given that India is the third largest importer of oil this is unnerving the oil market.
Looking ahead, crude oil inventory data is expected to be more supportive of oil prices with a further 2.3 million barrel draw expected following an 8 million draw the previous wee.
US crude trades -0.9% at $64.35
Brent trades -0.8% at $67.67
15:00 JOLTS Job Openings
15:30 Fed Williams speaks
15:30 BoE Governor Bailey speaks
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.