Tue, Jun 28, 2022 @ 16:21 GMT
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Stocks Point to a Mixed Start, Growth Fears Persist

US stocks are set to open mixed after a steep selloff last week, Concerns over Chinese growth rise.

US futures

  • Dow futures +0.01 % at 3197
  • S&P futures -0.1% at 4018
  • Nasdaq futures -0.12% at 12386

In Europe

  • FTSE +0.17% at 7364
  • Dax -0.63% at 13957
  • Euro Stoxx +1.8% at 3676

US stocks are set for a mixed open after steep falls from the previous week, as investors look ahead to what is expected to be a key week for retailers. Earnings are due from some of the top names in retail, and US retail sales will be released tomorrow, shedding light on whether surging prices are changing consumer habits or hitting firms bottom line.

All three indices fell sharply lower last week, with the S&P heading towards a bear market as investors fretted over persistently high inflation and fears that the Fed would need to act faster to tame runaway inflation.

The risks of a recession in the US are lower than the risks in Europe. Even so, the growth outlook has softened considerably, with Goldman Sachs downwardly revising US GDP growth for both this year and next.

Fears over slowing global growth continue to weigh on the market at the start of the week, fuelled further by shockingly weak Chinese data reflecting the impact of the ongoing COVID lockdowns. Chinese retail sales fell -11.1%, and industrial output tumbled -2.9%.

There is no high impacting US data due for release, NY Empire State manufacturing index is due later. Fed Williams is also expected to speak shortly and will be watched for further clues on monetary policy.

In corporate news:

McDonald’s will be in focus after the world’s largest fast-food restaurant announced that it was selling its business in Russia after 30 years following the invasion into Ukraine.

Where next for the S&P 500?

The S&P500 has rebounded off its 2022 low at 3850, recapturing the key psychological level at 4000. Buyers will want to see a move over 4070 the May 2 low and May 10 high to open the door to the key resistance area between 4100 and 4140. A move above here would negate the near-term downtrend and help build momentum towards 4220 and the 50 sma at 4330. On the flip side, a move below 3850 would create a lower low.

FX markets USD steadies at 20 years high.

USD is edging a few pips lower as USD bulls take a breather and 10-year treasury yields edge lower. The greenback continues to trade around a twenty-year high, boosted by expectations that the Fed will need to aggressively rein in persistently high inflation.

AUD/USD is underperforming its major peers as the China proxy falls following the weak Chinese data. Attention will now shift to the release of minutes from the RBA meeting, which could provide further clues to the central bank’s plans for monetary policy.

EUR/USD is edging higher despite the EC revising the region’s economic growth forecasts downwardly. GDP growth of 2.7% is forecast for this year, down from 4% previously. German PPI came in at 23.8%, a fresh record high.

  • GBP/USD -0.13% at 1.2190
  • EUR/USD +0.01% at 1.04370

Oil declines on China concerns.

Oil prices are heading lower at the start of the week as lockdowns in China and weak Chinese data fuel fears of a global recession, overshadowing the news that the EU is moving a step closer to banning Russian oil.

Data showing the COVID lockdowns are seriously impacting the world’s largest oil importing country is hitting the demand outlook. China is showing no signs of letting up on its zero-COVID policy, so that lockdown restrictions could continue for some time yet.

Losses in the oil market are being limited by the prospect of the EU deal banning Russian oil being achieved in the coming days. Oil is likely to remain well supported at around $110 amid the possibility of a Russian oil ban, which is not fully priced in yet. When the deal gets approved, oil prices could climb higher still.

  • WTI crude trades -1.7% at $106.78
  • Brent trades -1.3% at $108.74

Looking ahead

  • 15:15 BoE monetary policy hearing
DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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