US open: Futures tumble as inflation keeps rising

US futures

Dow futures -2.65% at 31140

S&P futures -2.15% at 3870

Nasdaq futures -2.34% at 11470

In Europe

FTSE -1.5% at 7160

Dax -1.85% at 12797

Euro Stoxx -1.98% at 3483

Learn more about trading indices

Stocks drop on aggressive Fed bets

US stocks are pointing to a weaker start as US inflation rose by more than expected dashing hopes that the US was passing peak inflation.

Both headline and core inflation came in stronger than expected. US CPI rose to 9.1% YoY in June, up from 8.6% in May and well ahead of the 8.8% forecast. Core CPI, which discounts more volatile items such as food and fuel, fell by less than expected to 5.9% YoY, down from 6%. While the tick lower in CPI is a move in the right direction, it is far too slow for the Fed to change its aggressively hawkish outlook.

The data shows that any talk of cooling inflation is still premature at this stage. More outsized rate hikes are expected, and the Fed is unlikely to take its foot off the hiking gas anytime soon.

The data has fueled hawkish Fed bets boosting the USD while pulling stocks and gold sharply lower.

In corporate news:

Twitter continues to scale lower after the social media platform said it was suing Elon Musk over a violation of the $44 billion takeover deal. Twitter has asked a court in Delaware to order Musk to continue the buyout as planned.

Delta trades lower despite a quarterly profit. Passenger numbers have picked up and are willing to pay more, compensating for higher costs.

Where next for the Nasdaq?

The Nasdaq has rebounded off the 11085 the 2022 low before running into resistance at 12100 the 50 sma. The index trades caught between the 20 & 50 sma, and the RSI is giving few clues at neutral. A breakout trade will see buyers look for a move over the 50 sma at 12100, opening the door to 12930, the June high. Sellers will look for a move below the 20 sma at 11700 to bring 11085 back into play.

FX markets – USD rises, EUR back to parity.

USD is surging following the hotter-than-expected US CPI data, which has fueled aggressive Fed bets lifting the USD back over 108.00

EURUSD has fallen back to parity on USD strength, paring gains from earlier in the day. Stronger than forecast eurozone industrial production, which rose 1.6% YoY in May, up from -2.5% in April and ahead of the 0.2% forecast, had supported the euro in early trade. Central bank divergence has pulled the pair lower.

GBP/USD rose before US CPI after the UK economy unexpectedly grew in May. The GDP rose 0.5% MoM, well ahead of the 0% forecast. The UK economy contracted -0.1% in March and -0.3% in April. Even so, it is by no means out of the woods - a contraction in Q2 is still likely. Still, the pound is focusing on the positives, rising above 1.19.

GBP/USD -0.3% at 1.1930

EUR/USD -0.3% at 1.0007

Oil falls into a bear market

Oil prices are falling below $100 per barrel extending losses from the previous session and hitting a 3-month low. Oil tumbled into a bear market after falling over 20% from its recent June high.

Despite the tight market, oil prices have been falling on fears over the demand outlook as recession worries build and COVID cases in China rise. The IEA also downwardly revised its oil demand outlook for this year to 1.7M BPD, from 1.8M BPD, and inventories showed a larger than forecast build.

According to the API data, stockpiles rose by 4.8 million barrels. EIA data is due later.

Technically the oil price is testing its 200 DMA, a key level of support. A close below the 200 DMA would be significant as it would be a first this year and could open the door to further declines while it remains out of oversold territory.

WTI crude trades -1.2% at $94.73

Brent trades -0.94% at $98.60

Learn more about trading oil here.

Looking ahead

15:00 BoC rate decision

19:00 Fed Beige Book

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.