Dow Jones Forecast :Dow Jones extends gains after PPI, retail sales data

US futures

Dow futures +0.55% at 34915

S&P futures +0.35% at 4474

Nasdaq futures +0.55% at 15893

In Europe

FTSE +0.87% at 7441

Dax +0.32% at 15712

• US PPI cools to -0.5% MoM, down from 0.4%
• Retail sales fall -0.1% vs -0.3% expected
• Biden & Xi Jinping meeting in focus
• Oil slips despite upbeat China data 

PPI eases, boding well for CPI to cool further

US Stock indices are set to open higher, extending gains from yesterday after the encouraging US inflation report fuels hope that interest rates have peaked.

The three main indices had their best daily performance yesterday in over six months after U S consumer prices came in softer than expected at 3.2% YoY, pulling yields lower. The market is breathing a sigh of relief, and the focus is now shifting to when the Fed could start cutting interest rates.

Data today showed that PPI unexpectedly fell -0.5% MoM in October after rising 0.4T% in September. The data bodes well for CPI to ease further.

Meanwhile, retail sales fell -0.1% MoM, better than the -0.3% forecast, and September saw an upward revision to 0.9%, suggesting that consumers are still resilient and putting the US economy in a sweet spot of cooling inflation and on track to avoid a recession.

Looking ahead, attention will be on a meeting between U.S. President Joe Biden and Chinese premier Xi Jinping on the sidelines of the Asia-Pacific Economic Cooperation summit. The two will meet for the first time in a year as they attempt to repair a strained relationship. The market will be is looking for any signs that friction is easing between the superpowers as they discuss artificial intelligence, drug-trafficking and military conflicts.

Corporate news

Target is set to jump over 14% on the open after reporting stronger-than-expected earnings. The retailer posted adjusted EPS of $2.10 ahead of $1.47 forecast thanks to the lowering of inventory and reining in of costs.

JD.Com, the Chinese e-commerce giant, is set to open almost 4% on the open after the company posted a jump in profits as supply chain difficulties eased.

Dow Jones forecast – technical analysis

After finding support on the 200 sma on Friday, the Dow Jones has rebounded higher, testing resistance at 35000, the September high. Buyers need to break above this level to extend gains to 36350 and 36680 the August high. On the downside, support can be seen at 34300, the 100 sma ahead of 34000, the August low and round number.

FX markets – USD rises, GBP falls

The USD has steadied after steep losses in the previous session as US inflation data cooled by more than forecast. However, today, yields are ticking higher, lifting the greenback from a two-month low versus major peers.

EUR/USD is falling after German wholesale prices cooled, dropping -0.7% MoM after rising 0.2% in September. The data comes after eurozone GDP figures showed that the economy contracted 0.1% in the third quarter, fueling bands that the ECB is also at the end of its rate hiking cycle.

GBP/USD is falling after UK inflation cooled to 4.6% YoY from 6.7%, marking the largest drop in inflation in two years and boosting bets the next move by the BoE will be a rate cut rather than a rate hike. The market is pricing in 25 basis points rate cut in June next year

EUR/USD +0.97% at 1.0795

GBP/USD +1% at 1.24

Oil inches lower despite upbeat China data

Oil prices are edging lower after three days of gains on signs that the US, the world's largest oil producer, could be at peak production off setting an improved demand outlook from China.

China's data showed that industrial output increased at a faster pace than expected, and retail sales jumped ahead of expectations, an encouraging sign for the world's second-largest economy and largest importer of oil. The data suggests that recent worries over economic growth in China may be overdone, particularly as the IEA joined OPEC, raising oil demand growth forecasts for this year.

Meanwhile, downward pressure on oil comes from supply worries amid the expectation that the US is near peak production for crude oil.

The EIA will release its first oil inventory report in two weeks later today after a system upgrade prevented the report from being released last week.

WTI crude trades -0.7% at $77.65

Brent trades +0.07% at $81.85

Looking ahead

15:30 US crude oil inventories