US open: Stocks mixed as retail sales jump, despite rising prices

US futures

Dow futures +0.15% at 36145

S&P futures +0.04% at 4686

Nasdaq futures -0.05% at 16186

In Europe

FTSE -0.07% at 7346

Dax +0.45% at 16215

Euro Stoxx +0.28% at 4397

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Inflation inspired sell off steadies

US stocks are set to open mixed but with just mild gains or losses, with retailers’ quarterly earnings and retail sales data in focus.

Retail sales surged higher in October, jumping 1.7% month on month, well up from the upwardly revised 0.8% from September and ahead of the 1.4% expected.

The data reveals that consumers have continued spending and spending well despite rising prices and deteriorating consumer morale. Even as inflation surged to a 30-year high and consumer sentiment crashes to a decade low, spending remains robust. This will be an encouraging sign for the Fed.

With the jobs market on the road to recovery, inflation surging and spending high, there seems to be little reason for the Fed to hold back from hiking interest rates.  Fed speaker later today could shed further light on this.

The prospect of a sooner rate rise is driving a mild rotation into cyclicals and out of high growth tech stocks, which are particularly sensitive to rising interest rates. The US Dollar has also rebounded firmly from two days of declines.

Separately but still with the theme of retailers, both Walmart and Home Depot released earning a little ahead of forecasts, again highlighting the resilience of the American consumer even as prices rise.

Where next for Dow Jones?

The Dow Jones continues to tread water around all time highs. The prices trades above the 20 sma and the RSI is in bullish territory keeping the buyers optimistic of a move towards 36560 and fresh all time highs. A move below the 20 sma and 35900 last week’s low could see the price drop towards 35500. It would take a move below this level for sellers to gain traction.

FX – USD rises, GBP extends gains on upbeat jobs data

After two days of losses the USD was attracting some dip buying on Tuesday, supported by the prospect of early Fed tightening.

GBP/USD is continuing to rebound from a yearly low after upbeat UK jobs data. UK unemployment declined to 4.3% the lowest level since July last year. Meanwhile the number of staff on payroll rose to above pre-pandemic levels. The data suggests that the labour market remains resilient despite the end of the furlough scheme.

GBP/USD  +0.24% at 1.3445

EUR/USD  -0.05% at 1.1361

Oil rises aead of data

Oil prices are on the rise amid expectations of tight inventories, brushing off for now a reports from the IEA that the end of soaring oil prices could be in sight. IEA kept its forecast for oil demand growth unchanged at 5.5 million barrels per day for 2021 and 3.4 million for 2022. However, the IEA also acknowledged that supply was finely on the rise. OPEC+ continues to unwind its supply cuts, albeit slowly and US output was also on the rise.

The energy agency also upwardly revised its oil supply forecast by 330,000 barrels per day.

Looking ahead attention is on the API stockpiles data due later.

WTI crude trades +0.7% at $80.37

Brent trades +0.95% at $82.20

Learn more about trading oil here.

Looking ahead

14:15 US Industrial production

17:00 Fed Bostic speaks

17:10 ECB Lagarde speaks

21:30 API crude oil stockpiles

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