US open: Stocks lower despite Q3 GDP upward revision

US stocks look set to open lower after strong gains in the previous session. Sentiment surrounding Omicron continues to see-saw. US GDP is upwardly revised.

USA (2)

US futures

Dow futures -0.07% at 35550

S&P futures -0.15% at 4641

Nasdaq futures -0.25% at 15943

In Europe

FTSE +0.15% at 7302

Dax +0.01% at 15459

Euro Stoxx -0.07% at 4171

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Omicron fears remain

US stocks are heading for a weaker open despite stronger than expected US GDP data and as Omicron concerns continue to limit the upside.

The US economy grew 2.3% in the July to September period an upward revision from the 2.0% recorded in the preliminary Q3 reading. Whilst the GDP reading was stronger than forecast it was down from 6.7% in the second quarter of the year. The significant drop in GDP in Q3 compared to Q2 was owing to a notable decline in consumer spending to 2% growth, down from 12% in Q2.

Omicron concerns continue to limit the upside in the market. Yesterday comments from President Biden that he doesn’t intent to impose lockdown restrictions in the US helped sentiment. Although given thin volumes stocks are see-sawing across the week unable to fully make up their mind surrounding the level of risk that Omicron presents to the economy.

Looking ahead US consumer confidence and existing home sales will be in focus. The consumer sentiment index dropped to its lowest level in seven months in November amid surging inflation and rising COVID cases. Household morale is expected to have improved slightly in December to 110.8.

In corporate news:

Tesla will be under the spotlight after US auto safety regulators open a formal investigation into 580,000 Tesla vehicles sold since 2017 over its decision to allow video games to be played on the front centre touchscreen.

Where next for the Dow Jones?

The Dow Jones is holding steady above its 100 sma but below its 50 sma. The RSI is giving few clues in neutral position at 50 as it awaits a freah catalyst. Buyers might look for a move above the 50 sma at 35630 for further upside towards 36215 the December high and 36500 towards fresh all time highs. Sellers could look for a move below the 100 sma to target 34700 the December 20 low.

Dow Jones Chart

FX – USD falls, GBP retakes 1.33

The USD is edging lower again on Wednesday on safe haven outflows as investors seek out riskier currencies. Whilst the USD/JPY was on the rise, demand for riskier currencies such as the Aussie was also rising.

GBP/USD is rising despite data revealing that the UK economy slowed by more than expected in the third quarter. The UK economy grew at 1.1% in Q3. The slowdown came even before the Omicron virus hit the UK, which doesn’t bode well for growth in the fourth quarter. With work from home restrictions and millions of people self-isolating the economic growth will have slowed in the October to December period. Even so, investors are cheering news that the UK government is not looking to apply any further restrictions until it has more data on Omicron and the severity of the variant.

GBP/USD +0.45% at 1.3315

EUR/USD +0.22% at 1.1306

 

Oil rebounds, although Omicron fears cap the upside

Oil prices are holding steady on Wednesday as tight supply was being offset by Omicron concerns after Singapore suspended quarantine free travel. Germany, Ireland, the Netherlands and South Korea have reimposed partial or lockdown restrictions. That said, both the UK and Australia have said that they won’t apply lockdown restrictions for the time being, until they have more data on hospitalizations and deaths from Omicron.

Separately data from the American Petroleum Institute showed that crude oil stock piles fell by 3.7 million barrels in the week ending December 17 more than the 2.8 million barrel decline that analysts at Reuters had forecast.

WTI crude trades +0.2% at $71.30

Brent trades +0.1% at $73.94

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Looking ahead

15:00 US Consumer confidence

15:00 Existing home sales

15:30 EIA crude oil stock piles

 

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