US open: Stocks fall as recession fears rise

US futures

Dow futures -0.5% at 33000

S&P futures -1.13% at 3870

Nasdaq futures -0.17% at 11333

In Europe

FTSE -1.13% at 7340

Dax -0.4% at 13930

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Rate rises for longer & weaker data

US stocks have opened lower extending losses from the previous session on rising recession fears fuelled by the federal reserve's more hawkish tone as it continues to fight against elevated inflation.

Earlier in the week, the Federal Reserve chair Jerome Powell signaled that interest rates would rise above the 5% level in 2023, taking them to a 15-year high. This suggests that inflation is expected to be stickier than originally expected and that the Fed will be hiking rates for longer. The news halted a rally from the start of the week fueled by US inflation cooling more than expected.

The Federal Reserve has not been alone in its more hawkish stance. The ECB also warned the market of more rate hikes to come in early 2023.

On the data front, US business activity, as measured by the composite PMI fell by more than expected in December at 44.6, down from 46.4 in November. The level 50 separates expansion from contraction. Both the services and the manufacturing PMIs were weaker than forecast.

Corporate news

Meta rises, boosted by a broker upgrade from JP Morgan, which revised the stock to overweight from neutral thanks to improving cost control.

Chinese ADRs such as Alibaba and Baidu are rising family after the US accounting watchdog confirmed it had access to inspect and investigate firms in China this removes the risk of these firms being removed from the US stock exchanges.

Where next for the S&P500?

The S&P500 ran into resistance at 4145 before falling lower. The price took out support at 3915, last week low, before dropping below the 50 sma to 3840. This, combined with the RSI below 50 supports the idea of further losses. Sellers could look to break below 3840 to extend the bearish trend towards 3700, the November low. Meanwhile, buyers could find encouragement from the longer lower wick on the candle, suggesting that there wasn't much acceptance at this lower level. Buyers will look for a rise above 39 15 to expose the 100 sma just over 4000 the psychological level.

FX markets – USD rises, GBP falls

The USD is rising, extending games from yesterday, boosted by safe-haven flows as recession fears rise and lifted by the more hawkish than expected federal reserve message earlier in the week.

EUR/USD is holding steady after losses in the previous session. The eurozone composite PMI was ahead of forecasts at 48.8, up from 47.8 and ahead of forecasts of 48. Still, this is below the level 50 which separates expansion from contraction.

GBP/USD it's holding steady after steep losses of 2% in the previous session after the dovish vote at the Bank of England meeting. Adding to the pound’s woes was weaker-than-expected UK retail sales, which dropped unexpectedly by 0.4% MoM in November after rising 0.9% in October as below forecasts of 0.3% growth. UK composite PMI was ahead of forecast but still below 50, indicating contraction and supporting the view that the UK economy is in recession.

GBP/USD  -0.03% at 1.2210

EUR/USD  +0.13% at 1.0630

Oil steadies after 4 days of gains

Oil is falling almost 3% lower on Friday as markets continue to weigh up hawkish comments from central banks. However, oil was still set for weekly gains, amid meant concerns over supply and optimism of a recovery in demand in China.

There are several factors driving oil prices at the moment, but as we head into the weekend, the dominant force appears to be concerned over the economic outlook following more hawkish than expected messages from both the Federal Reserve on the ECB.

Still, across the week, oil is still looking at around 5% games buoyed by worries over supply after Canada’s Keystone Pipeline remains partially shut following a leak and also boosted by the International Energy agency's projection that oil demand growth will recover in 2023 as China reopens.

WTI crude trades -2.6% at $74.85

Brent trades at -2.65% at $79.30

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Looking ahead

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