US open: Stocks point lower as energy prices, ADP payrolls jump

US futures

Dow futures -0.76% at 34061

S&P futures -0.95% at 4308

Nasdaq futures -1% at 14509

In Europe

FTSE -1.2% at 6996

Dax -1.55% at 14960

Euro Stoxx -1.45% at 4005

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Fed to hike sooner?

US stocks are crashing lower once again paring gains from the previous session. Fears that rising inflation  will force the Fed’s hand to tighten policy monetary policy faster than already expected are sending stocks lower, and the US Dollar higher. The fears come as natural gas prices spiral.

The RBNZ hiking its benchmark rate overnight adds to the hawkish tone. Whilst it was expected, the move has also focused expectations of a move by the Fed.

US ADP payroll numbers revealed that 568k private payrolls were added in September up from 374k in August and well above the 428k forecast.

The strong number comes following a solid ISM services PMI print in the previous session, which when combined with rising energy prices, pretty much cements a move by the Fed sooner than initially anticipated.

If the Fed reining in support wasn’t enough strife for the market to deal with, the lack of agreement in Washington over raising the US debt ceiling is adding to the risk off mood. The tock is ticking to wards October 18^th when the US government is expected to run out of cash.

Where next for the Nasdaq?

The Nasdaq trades within an ascending channel dating back to October last year. The price is fast approaching the lower band support at 14315. The RSI is supportive of further losses whilst it remains out of oversold territory. A break below here will expose the 200 sma a level which hasn’t been breached since April last year. It would take a move over 15130 the 50 sma and horizontal resistance for the bulls to gain traction and head back towards 15650.

 

FX – USD extends gains, EUR drops as supply chain issues hit German factory output

The US Dollar is extending gains, tracing treasury yields higher as expectations of a move by the Fed build. Overnight the RBNZ hikes rates to address rising inflation with more hikes expected. The hawkish tone adds to expectations that the Fed will start tapering bond purchases and tightening monetary policy sooner.

EUR/USD had dropped lower after German factory orders fell by more than expected in August and Eurozone retail sales also disappointed. German industrial orders dropped by 7.7% MoM, significantly worse than the 2.1% decline forecast. Separately Eurozone retail sales rose by just 0.3% MoM in August and whilst this was an improvement on July’s 2.6% decline it was still short of the 0.8% rise forecast.

GBP/USD -0.40% at 1.3575

EUR/USD -0.53% at 1.1538

Oil hovers near 7 year high, EIA data due

Oil prices hit a multi-year high  before easing lower. Brent reached $83 boosted by OPEC’s restraint in raising the output quota and amid a concern of broad-based tightness in the energy market.

On Monday OPEC said it will stick to its output plan, refusing to ramp up oil production by more than the 400k bpd agreed in July. The announcement sent oil prices soaring to 7 year highs and comes at a time when energy prices across Europe are spiraling higher. Natural gas trades at record highs as does coal.

API data revealed rising crude inventories in the US which has helped oil prices ease off recent highs.

EIA data is due later.

WTI crude trades -0.5% at $78.38

Brent trades -0.49% at $82.05

Learn more about trading oil here.

 

Looking ahead

15:30 EIA Crude oil inventories