US open: Stocks fall on lingering recession fears

US futures

Dow futures -0.84% at 32996

S&P futures -0.82% at 3894

Nasdaq futures -0.9% at 11302

In Europe

FTSE -1.21% at 7731

Dax -1.88% at 14930 

US jobless claims beat forecasts

US stocks are pointing to a weaker open, continuing the sell-off from the previous session amid rising recession fears and as investors digest the latest housing and jobs data.

Recession fears had been gaining traction after data yesterday showed that retail sales tumbled by the most in a year and industrial manufacturing output data also dropped sharply. The data raised concerns that the Fed’s aggressive rate hike cycle could tip the economy into recession.

Hawkish comments from Federal Reserve officials supporting the need for further rate hikes fueled recession fears further.

Today US jobless claims were stronger than expected, rising by 190k in the previous week, down from 205k and ahead of forecasts of 215k as the labour market continues to show resilience.

Meanwhile, the Philly Fed manufacturing survey dropped -8.9, which was an improvement on last month’s -13.7 and better than the -11 forecast.

Adding to the risk-off tone is the expected political showdown as the US hits its $31.4 trillion borrowing limit this week. While the US Treasury is set to take measures to meet its debt obligation, a showdown between Biden’s administration and lawmakers on Capitol Hill won’t be far away.

Corporate news

Proctor & Gamble fall pre-market after reporting that sales fell for the first time since 2017. Earnings also fell with EPS at $1.59 down from $1.66 in the same period last year.

Netflix is due to report after the close and is aiming to add 4.5 million subscribers in Q4. There are mixed views on Wall Street as to whether this is achievable.

Where next for the Nasdaq?

The Nasdaq ran into resistance at 11710 and is falling lower. The receding bearish bias on the MACD and the fall below the 50 sma keeps sellers hopeful of further downside. Sellers could look for a fall below 11035 the June low, to extend the selloff towards 10668 the December low. Meanwhile, should buyers push back above the 50 sma and yesterday’s high of 11710, bulls could look for a rise above 12000 the psychological level and the 200 sma. A rise above here would be significant because it would mark the first time in a year that the price has risen over the resistance.

FX markets – USD falls, AUD falls

The USD is falling, extending losses from the previous session as recession fears continue to drag the currency lower. The USD has pared earlier losses following stronger than forecast jobless claims.

AUD/USD is falling, underperforming the broader market after weak jobs data and as risk sentiment falls. Australian employment unexpectedly fell in December by -14.6k, after outsized gains in November. Unemployment held steady at historic lows. The data is fueling bets that the RBA could pause its rate-hiking cycle.

EUR/USD is rising boosted by comments from ECB president Christine Lagarde who voiced support for more interest rate hikes to tame inflation. Lagarde was clear that inflation remains far too high and said that policymakers were committed to bringing price growth back to the 2% level. her comments come as other policy makers consider whether a smaller rate hike could be more appropriate given that price inflation is easing on natural gas prices a plunging.

AUD/USD -0.8% at 0.6880

EUR/USD +0.2% at 1.0813

Oil falls as stockpiles rise

Oil prices are falling for a second straight session on the back of growing U S recession concerns and as inventories unexpectedly rise.

Slowing US retail sales data stoked fears of a potential recession in the US, which is hurting the demand outlook for oil, putting the price lower. Today these recession fears Eva shadowing the IEA report released yesterday, which warned that China's COVID reopening could push oil demand this year to record highs.

API inventory data revealed that stockpiles grew by 7.6 million barrels last week. This came following a build of 14.86 million barrels the week before. The API report also showed a 2.8 million barrel rise in gasoline stocks.

Looking ahead, investors will await the official inventory data from the EIA, which is expected to report a drop of 593,000 barrels after an 18.96 million barrel rise in the previous week.

Looking ahead, API inventory data is due later.

WTI crude trades -1.25% at $79.59

Brent trades at -1.15% at $85.02 

Looking ahead

15:30 EIA oil inventories