US open: Wall Street heads lower, jobs data in focus

US futures

Dow futures -0.13% at 35100

S&P futures -0.12% at 4520

Nasdaq futures -0.08% at 15663

In Europe

FTSE -0.7% at 7123

Dax -0.7% at 15735

Euro Stoxx -0.42% at 4207

Futures head lower

US stocks are set for a softer open as investors continue to weigh up the economic outlook, the latest covid developments and the chances of the Fed moving to taper bond purchases sooner rather than later.

In the previous session, cyclicals were out of favour amid rising concerns over the outlook for the US economy. Goldman Sachs downwardly revised its US GDP for the second time in a month unnerving the market. JP Morgan also downgraded its recommendation on US equities.

Meanwhile covid cases in the US are rising sharply, with deaths also jumping higher as schools return and offices reopen. All this at a time when the Fed is considering reining in support.

Attention will return to the labout market conundrum of slowing payrolls being added yet sky high job openings. The JOLTS job data is expected to reveal 10 million openings. This comes after just 253k jobs were added in August raising more questions than giving answers

Where next for the Dow Jones?

The Dow Jones fell steeply in the previous session finding support at the 50 sma, a support which has been strong across 2021. The price is currently testing this key level again today. The bearish divergence on the RSI suggests that the momentum is slowing which often comes before a move lower.  A close below the 50 sma would be significant and could open the door to 34600 the 100 sma. Any move above 35195 could set the index on the path higher back towards 35700.

FX – USD extends rebound, GBP drops on tax hike

The US Dollar is extending gains for a second straight session tracing treasury yields higher. After its steep selloff following Jackson Hole and the weak labour report, has the selloff been overdone? The risk is that the market is underpricing a move by the Fed. St Louis Fed President James Bullard said that the central bank should go forward with plans to taper bond purchases this year.

GBP/USD trades lower for a third straight session after the unveiling of tax hikes by British Prime Minister Boris Johnson. Boris Johnson plans to hike NI for both businesses and individuals by 1.25% in a move which could slow the post pandemic economic recovery.  The hike would mean that the UK has its highest peacetime tax burden ever.

GBP/USD  -0.14% at 1.3768

EUR/USD  -0.15% at 1.1823

Oil rises ahead of EIA data

Oil is on the rise as supply concerns overshadow demand fears amid rising covid cases. Oil trades over 1% higher after US Gulf of Mexico producers make slow progress to restoring output following Hurricane Ida 9 day ago. Around 80% of production remains offline.

Inventory data will be closely eyed for further clues as to how the storm impacted crude production. Expectations are for crude inventories to fall by 3.8 million barrels.

After high levels of volatility across August, which saw the price of oil swing by 7-10% per week, September is proving to be a lot calmer so far.

US crude trades +1.4% at $69.26

Brent trades +1.2% at $72.44

Looking ahead

15:00 JOLTS job openings

15:00 Ivey PMI

15:00 BoC

15:30 EIA oil stock change

19:00 US Beige Book