US open: Stocks edge higher at the start of Thanksgiving week

US futures

Dow futures +0.23% at 35673

S&P futures +0.28% at 4710

Nasdaq futures +0.36% at 16636

In Europe

FTSE -0.11% at 7219

Dax -0.26% at 16137

Euro Stoxx -0.25% at 4344

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Rotation out of cyclicals as parts of Europe lockdown

US stocks are set to start the holiday shortened Thanksgiving week in an upbeat fashion. M&A activity and signals of possible easing measures in China support the market mood, even as European stocks come under pressure.

The People’s Bank of China dropped several sentences from its latest monetary report which ruled out further accommodation, setting the stage for easier monetary policy. The change, which has been well received by the markets comes as Chinese economic growth has slowed in recent months.

Today only sees the release of mid-tier home sales data. However, looking ahead across the week there is plenty for data for investors to be focusing on including PMIs, durable goods, PCE inflation and the minutes from the latest Fed meeting.

This week President Biden is also expected to name the Fed Chair nominee either current Chair Fed Powell or Governor Lael Brainard. Whilst Brainard is considered the more dovish choice, with inflation surging at its fastest pace in 30 years the challenges are clear to see.

Stocks in focus

In corporate news, Vontage trades over 27% higher pre-market after Swedish telecommunications group Ericsson announced that they will pay $21 per share for Vontage. This values the firm at $6.2 billion.

Separately freshly IPO’d Rivian trades down 5% pre-market after the EV maker and Ford halted plans to jointly develop an EV together. Rivian debuted on November 11 surging 57% in the first few days of trading before falling back towards the IPO price.

 

Where next for the S&P500?

Whilst the Dow Jones is attempting to claw a few pips higher, the 4-hour chart remains bearish. The index has been trending lower since early November, the 50 sma is crossing below the 100 sma in a bearish signal. The RSI is also supportive of further downside whilst it remains out of oversold territory. Sellers will be looking for a move below 35500 for further downside. Any meaningful recover would need to retake 36050 Friday’s high and the 50 & 100 sma in order to retake 36300 to expose the all time high.

FX – USD moves higher, EUR consolidates below 1.13

The USD is edging higher, building ion last week’s gains. Hawkish Fed speak and surging inflation boosted expectations of a move by the Fed to hike rates sooner, lifting the greenback.

EUR/USD is consolidating under 1.13 after dropping 1.4% across the previous week. Rising COVID cases and dovish commentary from the ECB have dragged the common currency lower. Attention will now shift to Eurozone consumer confidence data which is expected to show consumer morale deteriorated in November amid rising covid cases and surging inflation. The Bundesbank have said that they expect German inflation to be just below 6% in November.

 

Oil extends declines on supply & demand concerns

Oil prices dropped around 6% last week in its 4^th straight week of losses, the worst losing streak since March last year. The price came under pressure as the US and China explore the possibility of releasing emergency oil reserves in order to bring the oil price and petrol prices at the pump lower.

Over the weekend, Japanese Prime Minister Fumio Kishida indicated that this was something that Japan was also looking into.

In addition to concerns over increased supply, the demand outlook is also starting to darken as COVID cases in Europe rise. Austria has re-imposed a full lockdown, this comes after Holland increased restrictions earlier in the month and as German COVID cases hit record highs.

WTI crude trades -0.3% at $75.76

Brent trades -0.4% at $78.12

Learn more about trading oil here.

 

Looking ahead

15:00 Eurozone Consumer Confidence

21:45 NZ Retail Sales