US open: Wall Street heads lower as inflation fears return
Fiona Cincotta October 18, 2021 12:38 PM
US stocks are set for a weaker open as commodity prices rise and inflation fears return.
Dow futures -0.41% at 35159
S&P futures -0.4% at 4451
Nasdaq futures -0.3% at 15098
FTSE -0.5% at 7195
Dax -0.8% at 15460
Euro Stoxx -0.93% at 4140
Tech underperforms, yields rise
US stocks are set to open lower as inflation concerns persist and treasury yields climb higher. Rising commodity prices, particularly oil prices, which only appear to go in one direction at the moment are boosting expectations of high inflation becoming more entrenched and a sooner move by the Fed to raise interest rates.
This is hurting demand for stocks, particularly tech stocks, which are less attractive as interest rates rise but also as investors also looking ahead to a slew of earnings from these big names.
Whilst impressive numbers from the big banks set an upbeat tine in the previous week, investors are jittery over whether corporate America can keep up the solid string of earnings.
Adding to the downbeat mood China’s GDP growth slowed considerably to 4.9%, down from 7.9% missing forecasts of 5.2%. The data revealed the impact that the Evergrande crisis and ongoing energy crunch was having on the world’s second largest economy.
Where next for the Dow Jones?
Friday’s jump higher saw the Dow Jones breakout above its 50 sma and key resistance around 35,000. This now acts as near term support as the rise higher runs out of momentum. It would take a mover below 34800 the 50 sma and back into the previous trading range for the near term upward bias to be negated. Bulls will keep an eye on 35600 and fresh all time highs.
FX – USD rebounds, AUD falls on weak Chinese data
The US Dollar is rebounding tracing US treasury yields northwards. Rising commodity prices are stoking inflation expectations and bets that the Fed will move to raise rates sooner.
AUD/USD is under performing its peers. The China proxy trades under pressure following disappointing GDP data from China.
GBP/USD -0.13% at 1.3732
EUR/USD -0.04% at 1.1595
Oil heads higher as generators boost demand
Oil prices scaled to fresh multi-year highs on Monday boosted by recovering post pandemic demand and by more demand amid a switch from coal and gas to oil and diesel as the energy crisis continues. With the Western hemisphere heading into the cooler winter months demand for energy is likely to pick up further, driving oil prices higher.
All in all, the oil deficit is set to worsen as demand outstrips supply. As long as OPEC refrain from adding more production, oil prices could continue climbing. Given that OPEC+ missed its target output again as some countries struggle to ramp up demand, this is looking unlikely for now.
WTI crude trades 1.3% at $82.87
Brent trades +0.86% at $84.82
14:15 Industrial Production
15:30 BoC Business Outlook
How to trade with City Index
How to trade with FOREX.com
Follow these easy steps to start trading with FOREX.com today:
- Open a Forex.com account, or log-in if you’re already a customer.
- Search for the market you want to trade in our award-winning platform.
- Choose your position and size, and your stop and limit levels.
- Place the trade.
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.