US open: Stocks fall as inflation shows no signs of slowing

US producer prices jump to 9.6% in November prompting bets of a more hawkish Fed as the two day FOMC meeting begins.

USA (2)

US futures

Dow futures -0.05% at 35628

S&P futures -0.38% at 4658

Nasdaq futures -0.57% at 15994

In Europe

FTSE +0.33% at 7260

Dax -0.06% at 15600

Euro Stoxx +0.04% at 4183

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Inflation to keep on rising

US stocks are heading lower as inflation shows no signs of slowing. US producer prices jumped 1% to 9.6% YoY in November, up from 8.6% in October. PPI measures inflation as wholesale level and is often considered a lead indicator for consumer price inflation. With PPI still on the rise the broad assumption is that CPI still has further to climb above the 6.8% level reached in November, an almost 40 year high.

The data is prompting bets that the Federal Reserve, which kicked off its two day meeting today, will look to act faster to tighten monetary policy. The US Dollar picked up off session lows whilst stocks also moved lower. The high growth Nasdaq is set to underperform the more cyclical focused Dow Jones, as is often the case when the markers expected the Fed to adopt a more hawkish position.

All eyes will now be on the Fed which is due to make its monetary policy announcement tomorrow. The broad expectation is that the Fed will look to taper at a faster pace, despite growing uncertainties surrounding Omicron.

In corporate news:

Apple looks to open higher as its trades just shy of the $3 million market cap level.

GameStop and AMC Entertainment fall along with meme stocks in general as retail investors free up cash for the festive period.

Where next for the Dow Jones?

The Dow Jones is in consolidation mode after its strong bounce higher from 33950 low hit at the start of the month. The 50 sma is offering support on the downside whilst 36100 caps the upside. The RSI is in neutral territory, giving away few clues. Seller could look for a move below the 50 sma at 35500 to expose the 100 sma at 35230 and 35000 round number to negate the near term bull trend. Meanwhile buyers will look for a move over 36000 to target 36500 and fresh all time highs.

Dow Jones chart

FX – USD rises, GBP rises as unemployment falls

The USD is trending lower after gain in the previous session as investors continue to weigh up the likelihood of a faster move by the Fed.

GBP/USD is rising after data revealed that the UK labour market continued to improve. Unemployment ticked lower to 4.2% and the claimant count dropped by -49.8k. The data shows that the labour market was holding up well as the furlough scheme wound down.

GBP/USD  +0.13% at 1.3237

EUR/USD  +0.18% at 1.1303

 

Oil falls as IEA cuts its demand outlook

Oil prices are edging lower adding to losses in the previous session. Trade remains choppy as investors continue to fret over Omicron and its potential impact on the oil demand outlook.

The Asian Development Bank trims Asia growth forecasts on the back of rising Omicron cases and the International Energy Agency said in the latest report that they expect oil supply to top demand in 2022. The IEA added that they expect the new COVID variant to dent the global recovery but not derail it.  However, balancing out the more down beat forecasts OPEC still expects solid demand in the coming year. OPEC upwardly revised its world oil demand for the first quarter of 2022.

Attention will now turn towards API data

WTI crude trades -0.1% at $70.95

Brent trades -0.01% at $74.30

Learn more about trading oil here.

 

Looking ahead

21:30 API crude oil stocks

 

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