US open: Stocks reverse after stronger doubt raises doubts over the Fed

US futures

Dow futures -0.15% at 32677

S&P futures -0.6% at 3875

Nasdaq futures -0.04% at 11463

In Europe

FTSE +1.28% at 7060

Dax +0.72% at 13274

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Job openings & ISM manufacturing beat forecasts

US stocks pared early gains as investors continue to weigh up the prospect of the Federal Reserve starting to tone down its aggressively hawkish stance and slow the pace of rate hikes as the two-day FOMC begins.

Another 25-basis point rate hike from the RBA revived bets that the Fed could follow suit. However, stronger-than-expected US data has raised doubts over whether the  Fed will be ready to soften its stance. And let’s not forget that core inflation is still rising and US GDP rebounded more strongly than forecast in Q3.

The housing market is showing signs of cooling and the ISM manufacturing PMI also grew at a slower pace in October at 50.2, down from 50.9 in September, although this was still ahead of the 50 level expected and the level which separates expansion from contraction.

Meanwhile, the JOLTS job vacancies data highlighted just how tight the labour market remains, with the number of vacancies increasing  10 10.7 million, up from an upwardly revised 10.28 million and still well ahead of the 10 million forecast. A tight labour market, could keep upward pressure on wages

Corporate news:

UBER jumps 14% despite missing profit forecasts. The ride-hailing app reported a wider-than-expected loss of $0.61 vs $0.18 forecast. Revenue was ahead of estimates at $89.3 billion. Q4 guidance was encouraging, and Goldman Sachs’s comments boosted the stock further.

Pfizer trades 4% higher after better-than-expected results and guidance. Pfizer reported EPS of $1.78 on revenue of $22.64 billion, beating forecasts of $1.44 on $21.33 billion revenue. The COVID vaccine generated $4.4 billion in revenue, ahead of forecasts.

Where next for the Dow Jones?

FX markets – USD falls, GBP rises

The USD is falling as investors continue to weigh up the Fed’s next move. The smaller hike by the RBA of 25 basis points is helping to fuel bets that the Fed could hike at a slower pace after the November meeting.

EURUSD is rising amid a risk on mood in the market. There is no high-impacting eurozone data today. Investors continue to digest record-high inflation, which will pile pressure on the ECB to hike rates aggressively, even as growth slows.

GBPUSD is rising as investors look ahead to the BoE rate announcement tomorrow. The market is broadly expecting a 75 basis point hike, this had climbed to 100 basis points amid the chaos of Truss’ expansionary budget. Now that Rishi Sunak has taken over leading the country, an element of calm has helped the Gilt market and the pound calm. Even so, with inflation at 10%, the market is expecting the BoE to act big, even if past hikes tell us that the BoE is far from comfortable with a jumbo sized hike. Today the BoE will kick start the QT programme.

GBP/USD -0.7% at 1.1520

EUR/USD -0.47% at 0.9920

Oil falls after weak China factory data

Oil prices are rising, paring losses from the previous session. OPEC+ upwardly revising the medium-term demand outlook, and the weaker USD is helping oil prices rise. Meanwhile, more COVID restrictions in China are limiting gains in oil as well as US oil output climbing to 12 million bpd in August.

Looking ahead, API oil stockpiles data will be released and is expected to show

WTI crude trades +1.92% at $85.70

Brent trades +1.83% at $92.56.

Learn more about trading oil here.

Looking ahead

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