US open: Futures fall as Omicron recovery rally pauses, jobless claims beat

US futures

Dow futures -0.43% at 35606

S&P futures -0.38% at 4683

Nasdaq futures -0.44% at 16319

In Europe

FTSE -0.38% at 7309

Dax -0.46% at 15628

Euro Stoxx -0.65% at 4203

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COVID restriction tighten in Europe

US stocks are pointing to a lower open after 3 days of solid gains. Whilst the selloff last Friday was brutal the recovery has been pretty spectacular given that there are still so many unknowns.

Risk sentiment received a boost this week amid early reports that Omicron symptoms appear to be mild and on the news that 3 doses of Pfizer could protect you from the new strain. However, rising COVID cases and tighter restrictions are taking the shine off that optimism. That said the move lower is mild, as investors rest assured in the knowledge that a booster jab can offer protection until a new Omicron vaccine is developed.

On the data front US jobless claims dropped below 200k to a post pandemic low of 184k, down from an upwardly revised 227k the week before.

The data comes after yesterday’s JOLTS job openings showed that there are 11 million job vacancies in the US. So, with plenty of demand for jobs, theoretically jobless claims should continue falling.

Investors are also casting an eye towards tomorrow’s inflation data, which is the other side to the puzzle. Expectations are for CPI to rise to 6.8%

Where next for the S&P 500?

The S&P 500 has extended its recovery from 4493 the December 3 low running into resistance at 4713 yesterday’s high. The bearish crossover on the MACD combined with the 50 sma crossing below the 200 sma on the 4 hour chart suggest that there could be some downside to come. Support can be seen at 4645 the 200 sma and 4616 the 50sma, a fall below here could negate the near term up trend. Sellers would look for a move below 4493 to gain traction. Buyers will look for a move over 4713 to target 4744 and fresh all-time highs.

FX – USD rises, EUR falls on dovish ECB

The USD is rising firmly as investors shift their focus towards CPI inflation data tomorrow ahead of the Fed meeting next week. Inflation is expected to top the 6.2% seen in October and the Fed are expected to accelerate the tapering of bond purchases.

EUR/USD is falling lower on reports that the ECB is considering an increase in its asset purchase programme at its next monetary policy meeting. This would be for a limited time with frequent reviews. The dovish reports hurt demand for the Euro.

GBP/USD -0.16% at 1.3183

EUR/USD -0.26% at 1.1313

Oil pauses for breath as COVIDA restrictions tighten.

Oil prices are edging mildly lower after three straight days of gains. Even so oil prices have still surged over 8% so far this week on optimism surrounding the Omicron COVID variant. Early reports suggest that the symptoms are mild, and 3 doses of the Pfizer vaccine will neutralize the virus. These findings have helped oil rebound from a 16% fall the previous week.

Today the rally has run out of steam as governments in Europe tighten COVID restrictions in order to stem the spread of the virus. Whilst there will inevitably be a hit to oil demand, this is likely to be less than initially feared, helping oil prices recover at least some off the sharp Omicron inspired selloff.

WTI crude trades -0.8% at $71.70

Brent trades -0.8% at $75.15

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Looking ahead

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