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PPI rose by more than expected and jobless claims unexpectedly fell. The data points to a more hawkish Federal Reserve and higher rates for longer.

US futures

• Dow futures -0.85% at 33830
• S&P futures -1.13% at 4101
• Nasdaq futures -1.52% at 12500

In Europe

• FTSE -0.12% at 79991
• Dax -0.35% at 15470 
   

US PPI rises by more than forecast

Stronger-than-expected data has continued into Thursday, sending futures lower ahead of the open.

US futures quickly pared earlier gains following the release of hotter-than-expected US PPI and a stronger-than-forecast labor market.

US PPI rebounded in January, rising 0.7% MoM, up from -0.2% in December and ahead of forecasts of 0.4% MoM.

Meanwhile, US jobless claims unexpectedly fell to 194k from 196k in the previous week, down from the 200k forecast.

The data build on the theme of stronger-than-forecast data points this week, after US CPI and retail sales came in ahead of estimates, suggesting, far from cooling into a recession, the US economy is still pretty hot. Inflation concerns are once overtaking recession fears as the prime concern for the markets, which means hawkish Fed fears are back in the driving seat.

There are now growing worries that the Fed won’t be pausing rate hikes any time soon, let alone perform a dovish pivot.

As we would expect, as hawkish Fed bets rise, stocks are heading lower, led by the tech-heavy Nasdaq. Meanwhile, the USD is pushing higher.

Looking ahead, investors will focus on the Fed policymakers who are due to speak and could shed more light on the Fed’s future path for rate hikes.
 

Corporate news

Shopify falls almost 10% pre-market after the e-commerce platform beat revenue and profit forecasts but gave disappointing forward guidance. The firm expects consumers to rein in spending.

Roku rose 12% pre-market after the streaming device beat Q4 revenue estimates and posted a 16% increase in active users. Roku also forecast strong growth in the current quarter.
 

Where next for the Nasdaq?

The Nasdaq rebounded from 12400, running into resistance at 12750 today, before easing lower. The index continues to trade above the multi-week rising trendline and the RSI supports further upside. Buyers could look for a rise to 12900, the 2023 high, to extend the bullish run and create a higher high. Above here 13200 the August 26 high comes into play. On the flip side, a break below 12240 the February 13 low, and 12100, the 100 sma could create a lower low exposing the 200 sma at 11920.

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FX markets – USD rises, AUD falls

The USD is rising to a monthly high after strong data fuels bets that the Fed will keep raising interest rates for longer.

AUD/USD is falling amid a stronger USD and after Australian jobs data. The figures showed an unexpected rise in Australian unemployment and signs that the labor market is starting to weaken as the impact of rate hikes starts to show through. Unemployment rose to 3.7%, up from 3.5%, and the economy lost jobs for the second straight month.

GBP/USD has fallen below 1.20, adding to steep losses yesterday. There is a growing divergence between the US and the UK, whereby the US is showing signs of hotter-than-forecast inflation and a more hawkish Fed, while the UK is experiencing cooler-than-forecast inflation and signs of a less hawkish BoE.

AUD/USD -0.38% at 0.6877

GBP/USD -0.41% at 1.1985
 

Oil trades in a familiar range

Oil prices continue to train in a narrow range across the week, consolidating after rallying 9% in the previous week and as investors continue to weigh up fundamental factors.

Traders have largely shrugged off a strong build in US crude inventories. According to EIA data, US crude stockpiles rose to the highest levels since June 2021. However, this is reportedly owing to a data adjustment that explains the muted moves in oil prices following the data.

Elsewhere oil traders continue to weigh up Russia's 500,000 bpd production cut from next month, the uncertain global economic outlook, as well as the economic rebound in China.

WTI crude trades -0.01% at $78.85

Brent trades at -1% at $85.06 

Looking ahead

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