US open: Stocks ease lower with retail sales and retailers' sales in focus

US futures

Dow futures -0.03% at 33567

S&P futures -0.1% at 3987

Nasdaq futures -0.16% at 11853

In Europe

FTSE +0.03% at 7369

Dax  -0.64% at 14264

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Retail sales jump

US stocks are edging modestly lower after solid gains in the previous session and as investors digest the latest data and corporate earnings, shedding light on the health of the US consumer.

US retail sales jumped 1.3% MoM in October, ahead of the 1% forecast and up from 0% in September. The data highlights the resilience of the US consumer even as inflation is high and interest rates rising.

The data isn’t likely to impact the Fed’s next move, which probably explains why the market barely reacted to the data.

Recent data has shown that inflation is cooling, fueling expectations of a less aggressive Federal Reserve. The Fed has been trying to tame inflation without tipping the US economy into recession. Optimism is rising that the elusive soft landing could still be a possibility.

Stocks are a little off today, which could be more to do with the Russian missile landing in Poland. This served as a stark reminder a that an escalation of the ongoing war remains a real risk.

Corporate news:

Target slumps 13% pre-market after a huge miss on earnings and after issuing a concerning outlook for the key holiday quarter. EPS was $154, against $the 2.13 forecast. Target, which focuses on general merchandise, is suffering amid a change in consumer habit. With less disposable income available, consumers are prioritizing groceries, which helped Walmart outperform and

Lowe’s is rising 1.8% pre-market after the home improvements retailer raised its annual profit forecasts amid strong, steady demand for its products.

Where next for the Dow Jones?

The Dow Jones trades within a steep ascending channel, recapturing its 200 sma and the multi-month falling trendline resistance before running into resistance at 34000. The RSI supports further gains when it stays out of overbought territory. Buyers will look for a move over 34000 and 34300 , the August high the extend the bullish trend. On the downside, support can be seen at 33000.

FX markets – USD drops, EUR jumps.

The USD is falling, extending losses from the previous session as expectations of a less hawkish Fed rise. Inflation is cooling, and the Fed is saying that a slower pace of hikes could be appropriate, which is dollar negative.

EURUSD is rising over 1.04, around a 4-month high. Concerns over a potential escalation of the war in Ukraine after a Russian missile landed in NATO member Poland have been short-lived. The euro is capitalizing on the weaker USD, looking ahead to a speech by ECB President Christine Lagarde later today.

GBPUSD is rising after inflation rose to a 41-year high of 11.1% YoY in October, lifted by rising energy and food prices. Inflation is five times the BoE’s target level and will add pressure on the central bank to hike again in December. Attention will now turn to the Chancellor’s Budget tomorrow, which is expected to be hard-hitting and dominated by tax hikes and spending cuts. The government’s tight fiscal policy is expected to slow demand considerably, which could take the pressure off the BoE to hike rates as aggressively going forwards. This could mean that the pound’s recent gains could be short-lived.

GBP/USD  +0.05% at 1.19

EUR/USD  +0.28% at 1.04

Oil steady  ahead of EIA stockpile data

Oil prices are flat, having recovered from earlier losses. The price is holding steady as concerns surrounding an incident off the coast of Oman are offset by concerns over rising COVID cases in China.

A commercial vessel has reportedly been struck by an exploding drone in the Gulf of Oman, although details remain sketchy.

Meanwhile, COVID cases continue to rise in China, hurting the oil demand outlook. Any gains in oil are likely to remain capped while the threat of more COVID lockdowns lingers.

According to the latest IEA forecast, demand growth is set to slow to 1.6 million bpd in 2023 from 2.1 million bpd this year.

Also acting as a support to oil prices was a larger than-expected draw in inventories. According to the API report, inventories fell by 5.8 million barrels

Looking ahead, EIA data is due.

WTI crude trades +0.1% at $87.14

Brent trades +0.2.4% at $94.14

Learn more about trading oil here.

Looking ahead

15:30 EIA crude oil stockpiles

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