US open: Futures fall on growth fears & as China's lockdown continues

Congress building
Fiona Cincotta
By :  ,  Senior Market Analyst

US futures

Dow futures -0.7 % at 33950

S&P futures -0.82% at 4236

Nasdaq futures -0.8% at 13240

In Europe

FTSE -1.7% at 7382

Dax -1.3% at 13972

Euro Stoxx -1.6% at 3783

Learn more about trading indices

Stocks drop,

US stocks are set for a weaker start to the new week as fears of further lockdowns in China spooked investors, which were already nervous about slowing global growth after a more hawkish sounding Fed Chair Powell last week.

The lockdown in Shanghai is ongoing, but now there are fears that Beijing could also be locked down as more cases appear and as authorities show no signs of ending the zero-COVID policy.

Chinese shares saw their biggest slump since the initial pandemic selloff in February 2020 and US-listed Chinese stocks are trading lower pre-market.

This week is a big week for earnings with 180 companies from the S&P500 due to report. Tech stocks will be under the spotlight and also US Q1 GDP data and PCE figures, the Fed’s preferred inflation gauge.

In corporate news:

Twitter rises pre-market on the news that the social media company and Elon Musk are working to hammer out the details to the takeover traction, which could be agreed upon as soon as today. It is impossible to know what Elon Musk is looking to do with Twitter, whether this is just a personal vendetta or whether he has a commercial strategy in mind to improve monetization at Twitter, which we know has been struggling.

More news on the stocks to watch

Where next for the Dow Jones?

The Dow Jones had been trading relatively range bound since mid-March, supported by the 50 sma on the lower side and capped by 35500 on the upper limit. The price recently faced rejection at 35550 and dropped lower breaking below the 100 &  50 sma, falling to a low of 33450 which is now acting as an immediate floor. The bearish MACD gives sellers a reason to remain optimistic about further downside. Sellers need to break below 33450 in order to target 33160 the January low. On the flip side, buyers will look for a move over the 50 sma at 34200 in order to expose the 100 sma at 34900.

Dow chart

FX markets USD rises, EUR tumbles.

USD is charging higher, extending gains from the last week after Fed Chair Powell cemented expectations of a 50-basis point rate hike and a more aggressive approach to tightening policy towards the summer. Safe haven flows are also boosting the greenback amid China’s ongoing lockdown.

USD/CNH rise to its highest level since November 2020 as the yuan tumbles.

EUR/USD trades lower despite an earlier relief rally in the Euro after Macron won the French Presidential elections by 58% TO Marine Le Pen’s 42%. Macron’s victory is considered euro positive. However, the intense flight to safety as stocks tumble has dragged the euro lower in the European session. Stronger than forecast German IFO business sentiment data has been shrugged off. EURUSD dropped to a low of 1.0707 but has since clawed back some of those losses.

GBP/USD -0.7% at 1.2743

EUR/USD -0.75% at 1.0743

Oil falls 5% on China demand fears

After falling just shy of 5% across last week, oil prices are down another 5% today on fears over the demand outlook as China’s COVID problem deteriorates.

The ongoing lockdown in Shanghai means that China’s oil demand outlook was already weak. However, with Beijing now also looking as if it could go into lockdown oil prices are tanking. China is sticking with its zero-COVID policy despite the high economic cost.

In addition to China’s woes, fears of higher interest rates dampening the growth outlook is also hitting on the demand outlook.

Still, losses could be limited in oil amid reports that the EU was considering applying smart sanctions against Russian oil imports. Any confirmation of sanctions on Russian oil could spark a rapid rebound in oil prices.

WTI crude trades -5% at $96.60

Brent trades -4.9% at $100.80

Learn more about trading oil here.

Looking ahead


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