Dow Jones forecast - Stocks fall as recession fears rise: US Open

US futures

Dow futures -0.18% at 33335

S&P futures -0.25% at 4085

Nasdaq futures -0.3% at 13075

In Europe

FTSE +0.18% at 7655

Dax -0.64% at 15715

• ADP payrolls are 145k vs 200k forecast
• Weak data fuels recession fears
• EUR supported by composite PMI rising to 10 month high
• Oil pauses after strong gains

Learn more about trading indices

ADP payrolls fall by more than expected

US stocks are heading for a modestly weaker open after losses in the previous session, as recession fears continue to weigh on risk sentiment.

A series of weaker-than-expected US economic data so far this week, including ISM manufacturing PMI, factory orders and JOLTS job openings falling below 10 million for the first time in almost two years, has investors fretting that the Fed’s prolonged and steep monetary policy tightening could result in a severe recession.

Meanwhile, Cleveland Fed President Loretta Mester’s hawkish commentary is adding to the market’s fears. Mester said that rates would need to rise above the current 5% level and stay there for some time in order to tame inflation.

ADP data showed that 145k private payrolls were added in March, down from 242k in February and below the 200k forecast. The data adds to evidence that the labour market is starting to cool and comes ahead of Friday’s closely watched non-farm payroll report.

Looking ahead, attention will also be on the ISM non-manufacturing PMI, which is expected to slip slightly to 54.56 from 55.1. Weakness in this figure could fuel recession fears pulling stocks lower.

Corporate news

Johnson & Johnson rises pre-market after the firm agrees to pay $8.9 billion to settle claims that talc caused cancer, while still denying the allegation.

FedEx rises to a 7-month high ahead of the open as investors cheer the cost-cutting plan to target $4 billion in savings by merging delivery networks.

Where next for the Dow Jones?

The Dow Jones continues to trade within a falling channel dating back to late December. The price rebounded lower off the falling trendline resistance and is testing support at the 100 sma around 33200. A break below here is needed to expose the 50 sma at 33100 and the 200 sma at 32500. Meanwhile, should buyers defend the 100 sma, bulls could retest the falling trendline resistance at 33650 and the weekly high at 33700 to create a higher high.

FX markets – USD rises, GBP falls

The USD is holding steady after two days of losses after weak data reinforced the expectations of the market that the Fed will cut rates by the end of the year. Weak ISM non-manufacturing data could see the USD fall further.

EUR/USD is hovering around 1.0950 a 2-month high, paring earlier gains. The pair is being pressurized by the stronger USD and as investors digest a slightly softer composite PMI reading of 53.7, missing the 54.1 initially expected, but still up from 52 in February.

GBP/USD is consolidating its recent run higher to 1.25, edging lower amid a downbeat market mood. UK services PMI fall slightly to 52.9 in March from 53.1 in the previous session, marking the second straight month of expansion. The data suggests that the UK economy is proving to be resilient.

EUR/USD +0.08% at 1.09

GBP/USD -0.05% at 1.2482

Oil pauses for breath

Oil bulls are pausing for breath after four straight days of gains. While the upside is being supported by OPEC’s production cuts and a draw on inventories, this is being offset by US recession fears.

After a series of weak data this week, fears are mounting that the US economy, the world’s largest consumer of oil, will enter into a recession, which would hurt the oil demand outlook.

API data showed that US crude oil inventories fell by 4.3 million barrels in the week ending March 31. The EIA report is due later today.

WTI crude trades -0.08% at $81.05

Brent trades at -0.18% at $85.44

Learn more about trading oil here.

Looking ahead

15:00 US ISM non-manufacturing PMI

15:30 EIA oil inventories