US open: Growth concerns send futures sharply lower

Stocks set to tumble as concerns over growth grow. Jobless claims unexpectedly rise.

USA (2)

US futures

Dow futures -01.39% at 34200

S&P futures -1.3% at 4300

Nasdaq futures -1.4% at 14600

In Europe

FTSE -1.9% at 7017

Dax -1.8% at 15393

Euro Stoxx -2.2% at 3987

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Jobless claims miss, FOMC moving towards tapering

The mood in the market has soured considerably overnight sending stocks sharply lower across the board. Rising covid cases, growth concerns and a Fed which is looking to taper support is hitting demand for riskier assets.

Rising covid delta cases are unnerving investors, reminding the market that despite the vaccine, the covid threat hasn’t entirely disappeared. Confidence has been knocked that the virus could still come back and hit growth, particularly if new variants arise.

The FOMC minutes confirmed that the Fed was moving towards tapering bond purchases. Although in a mixed message the Fed also said that whilst there was progress in the economic recovery, more progress was needed to set a timeline.

The Fed looking to move towards tapering asset purchases comes at a time when traders are increasingly less concerned over inflation and interest rate rises. The 10 year treasury yield slumped to a 4 month low.

US jobless claims missed forecasts coming in at 373k up from an upwardly revised 371k whilst missing forecasts of 350k.

Recent data from the US has been disappointing with the Citigroup surprise index at the lowest level since February. Peak growth appears to have passed, so the timing of easing back on support is concerning the markets.

Where next for the Dow Jones?

The Dow Jones is dropping sharply lower, breaching a key support a 34350 the 50 day ma and the ascending trendline support dating back to November setting the scene for further losses. The MACD appears to be forming a bearish crossover supportive of further downside. Should the Dow take out 34125 low June 30th then sellers could gain momentum towards 33700 horizontal support. Any move higher would need to retake the 50 dma and ascending trendline at 34350.

FX – Euro rises despite dovish move by ECB

The US Dollar is moving lower away from its three month peak reached yesterday whilst tracing bond yields southwards.

EUR/USD -The pair is capitalizing on the weaker US Dollar, rising despite the dovish tilt from the ECB which will allow an inflation overshoot – essential moving back the goal posts for raising interest rates.

GBP/USD is extending losses despite the weaker USD, as rising covid cases raise doubts over the UK’s easing of covid restrictions. Adding to the downbeat tone surrounding the Pound, PM Boris Johnson warns the EU over the Brexit NI protocol.

GBP/USD  -0.27% at 1.3763

EUR/USD  +0.4% at 1.1837

Oil slumps on OPEC+ concerns, EIA data up next

Oil prices are extending the selloff for a third straight session as investors fret over the supply outlook across the rest of the year. Following the collapse of the OPEC+ talks, where the group of oil producers failed to agree unanimously to raise output, concerns are growing that the current output agreement could be abandoned. Currently the OPEC+ group have in place curbs on output to the tune of 6 million barrels a day until April 2022. However, a lack of agreement as to how to ease the curbs could see oil come flooding back to the market, echoing the price war of last year as producers look to gain market share.

EIA data is due to be released and could offer some support to oil prices. The API reports revealed an 8 million barrel draw highlight the current picture of strong demand and limited supply. However, the market is looking past this now to a potential supply glut later in the year.

US crude trades -0.5% at $71.35

Brent trades -0.3% at $72.86

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Looking ahead

15:30 EIA crude oil inventories

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