US open: Wall Street heads lower, Evergrande fears resurface

Wall Street heads lower as Evergrande concerns re-surface and Nike reminds the markets of the disruption caused by supply chain issues.

USA (2)

US futures

Dow futures -0.4% at 34640

S&P futures -0.46% at 4427

Nasdaq futures -0.68% at 15223

In Europe

FTSE -0.3% at 7053

Dax -0.73% at 15528

Euro Stoxx -0.95% at 4135

Stocks fall but set for mild weekly gains

After two days of gains, doubts are setting in. Fears surrounding the debt ridden Evergrande have resurfaced hitting risk sentiment. Consumer and retail shares are also expected to have a tough session amid weakness pre-market and in Europe.

The debt crisis at Evergrande is unnerving investors. After the coupon payment deadline passed investors are in limbo over what will happen next. With a 30-day grace period before it is considered a default, the crisis potentially has longer to run.

Those fears that we saw at the beginning of the week, that the collapse of Evergrande could pose a systemic risk and spread across the Chinese financial system, are back to haunt the market ahead of the weekend. Traders are keen to take risk off the table – who knows what could happen over the weekend, particularly given the silence from Evergrande.

Separately, fears surrounding supply chain issues have been put back under the limelight following Nike’s earnings. The sports retailer warned over supply chain shortages which could last into the holiday season, a key period for any retailers. Nike trades 5% lower pre-market after slashing FY sales growth forecasts.

Where next for the Nasdaq?

The Nasdq broke out of the rising wedge at the start of the week before rebounding off 14815 and retaking the key 15200 level, the 50 sma as well as horizontal support turned resistance. Whilst the index  is trading lower and the RSI points southwards, any move lower would need to break below 15200. A break here could see sellers gain traction and bring 14815 back into target ahead of 14650 the 100 sma. Should 152000 hold, resistance can bee seen at 15565 last week’s high on the way to 15700.

FX – USD rebounds, AUD the Evergrande barometer

The US Dollar is trading higher clawing back losses from the previous session, boosted by safe haven flows as the Evergrande doubts grow. The greenback is set to end the week flat as the weakness stemming from the Fed meeting is matched by a boost from safe haven demand.

AUD/USD The Aussie, a proxy for China and the barometer for the #Evergrande crisis is under performing peers on Friday. Should the Evergrande situation deteriorate further 0.72 could come into focus.

AUD/USD -0.5% at 0.7256

GBP/USD  -0.3% at 1.3680

EUR/USD  -0.15% at 1.1720

Oil set for third week of gains

Oil prices are easing slightly but are still set for gains of around 2% across the week. This will mark the third week of gains as ongoing output disruptions and large than expected inventory draws support the price.

Output has been slow coming back online following Hurricane Ida and other tropical storms which have cause disruptions which could last for months.

Tight supply as a time when demand is rising and when OPEC member are struggling to increase output helped oil prices reach the highest level since early July.

The rally across the week was capped on Friday amid the first public sales Chinese sate crude reserves.

WTI crude trades -0.3% at $73.03

Brent trades -0.18% at $76.41

Looking ahead

15:00 US new homes sales

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