US open: Futures decline on rate concerns & US - China tensions
Fiona Cincotta February 6, 2023 1:56 PM
Stocks falls on follow through selling after Friday's NFP report and amid escalating U-China geopolitical tensions.
US futures
Dow futures -0.50% at 33740
S&P futures -0.75% at 4104
Nasdaq futures -1% at 12447
In Europe
FTSE -0.71% at 7838
Dax -0.95% at 15369
Jobs data supports a more hawkish Fed
US stocks are set for a weaker start on Monday, extending losses from the end of last week as investors continue digesting the stronger-than-expected U.S. jobs report, which has prompted investors to rein in optimism surrounding a dovish pivot and as US-China tensions rise.
There are a number of Federal Reserve policymakers who are due to speak across this week and could shed some light on how hawkish the Fed may need to be in order to rein in inflation. Federal Reserve chair Jerome Powell will be the main focus and is due to speak tomorrow.
Separately news of a suspected China spy balloon shot down in US waters is unnerving investors. Investors are weary that this could ramp up pressure on Biden to apply further restrictions on China. Chinese ADR’s such as Alibaba and JD.com trade lower pre-market.
Attention will also be on earnings as earnings season continues and is over halfway through. Companies due to report this week include Disney, PepsiCo. Meanwhile,Tyson Food and Activation Blizzard report today. So far, 69.9% of companies have reported results above expectations. Overall quarterly earnings are set to decline 2.7%.
Corporate news
Tyson food has fallen sharply premarket after reporting a 70% full in EPS to $0.85c as margins are squeezed by rising operating costs.
Dell rises pre-market despite the firm announcing that it will cut 6.5% of the workforce as demand for personal computers falls.
Where next for the S&P500?
After running into resistance at 4195, the S&P500 has eased lower, taking out support at 4150 and is testing 4100 the December high. The RSI remains above 50, and the 50 sma has crossed above the 200 sma keeping buyers hopeful of further upside. Buyers would look for a rise over 4150 and 4195 to extend the bullish uptrend towards 4325. However, sellers could be encourage d by the long wicks on the previous two candles, which suggest that there isn’t much demand at the higher prices. Sellers could look for a fall below 4000/3995 the psychological level, 100 sma and last week’s low to extend the downside to test the 200 sma at 3940.
FX markets – USD rises, EUR falls
The USD is rising, adding to 1% gains last week, as investors re-assess the likelihood of a less hawkish Fed in light of Friday’s strong jobs report. The risk-off mood from geopolitical tensions is also supporting the greenback,
GBP/USD is rising after steep losses last week and as investors digest comments from BoE policymaker Catherine Mann who said that more rate hikes are likely, than not. Huge strike action across the UK highlights the struggles that workers face amid the ongoing cost of living crisis.
EUR/USD remains below 1.08 after a mixed bag of data. While German factory orders rebounded firmly up 3.2% MoM in December, up from -4.4% in Nov and well ahead of the 2% forecast. Eurozone investor sentiment also improved considerably as recession fears eased. However, retail sales were weaker than forecast, dropping -2.8% MoM, below the 2.7% decline forecast.
GBP/USD +0.1% at 1.2070
EUR/USD -0.12% at 1.0770
Oil rises after steep losses last week
Oil prices are edging higher at the start of the week after booking losses of almost 8% last week. Concerns that the Fed may not be able to slow the pace of rate as much as initially expected, after the strong jobs report unnerved the oil market, fueling bets of slowing global growth.
Today those recession fears are being met with optimism surrounding the demand outlook amid the China reopening. The EIA expects half of global oil demand growth this year for come from China and the reopening bodes well for demand if jet fuel demand is anything to go by.
Still, higher interest rates and a stronger USD are keeping oil price gains in check.
WTI crude trades +0.3% at $74.00
Brent trades at +0.7% at $80.45
Looking ahead
N/A
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.
Your form is being processed.