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Stock Futures Trade Lower, Here Is Why


19 November 2021 Written by Naeem Aslam  AvaTrade Chief Market Analyst Naeem Aslam

European and US stock futures are trying to recover some of their losses from yesterday. The Dow Jones Industrial Average fell 211 points on Wednesday, it was pulled down by a 4.7 percent due to the drop in Visa shares. The S&P 500 index fell 0.26 percent. Although most mega-cap technology companies finishing in the green, the Nasdaq Composite fell 0.33 percent.

Overall, the stock market is hovering near all-time highs. The Dow is down 1.7 percent from its all-time high, while the S&P 500 and Nasdaq Composite are down 0.6 percent and 0.8 percent, from their highs, respectively.

Forex 

Inflation in the United Kingdom rose faster than expected to its highest level in a decade, putting pressure on the Bank of England to boost interest rates and intensifying the squeeze on household living standards. Energy costs and the impact of broad-based supply shortages across the economy drove consumer prices up 4.2 percent from a year ago in October. That was the fastest rate since November 2011 and a significant increase from September’s 3.1 percent. Economists and the Bank of England had predicted 3.9 percent growth.

For the time being, transient variables such as energy prices and the resurgence of global demand following the pandemic are driving inflation. However, if allowed uncontrolled, the BOE is concerned that it would spread further.

Stocks 

Amazon’s feud with Visa took a dramatic turn on Wednesday. The delivery company is in talks to switch from a Visa co-branded card to a Mastercard co-branded card. Amazon also announced that beginning next year, it will no longer accept purchases made with Visa credit cards issued in the United Kingdom. It’s the latest step in the web retailer’s fight versus transaction fees levied by payment networks. Rivian Automotive Inc.’s hyperventilating five-day rally finally ended on Wednesday, wiping out more than $23 billion from the newly public electric-truck maker’s valuation. 

In New York, stock of the firm, which made its trading entrance last week and saw its stock rise in five days, fell as high as 18 percent to $140.35. This removed a chunk roughly equivalent to the current market capitalizations of American Airlines Group Inc. and News Corp.

Evergrande, China’s largest issuer of US dollar-denominated debt, has been on the verge of declaring bankruptcy this year. The corporation has paid last-minute payments and has restarted building on flats that are due to purchasers. However, this is only a small part of the developer’s debt. China Evergrande, an indebted property developer, is selling its remaining interests in film production and streaming business HengTen Networks to generate around $273 million.

Covid-19

It appears that Covid-19 will spoil another Thanksgiving. Authorities are delivering travel warnings for the second year in a row, as cases in the United States begin to rise for the sixth time. The White House announced that it will spend billions of dollars more to bump up vaccine supplies in the United States, with the objective of enhancing local production of mRNA vaccines by one billion doses per year by 2022. In Europe, it’s becoming more difficult to be a vaccine sceptic and go about your business as governments impose new restrictions aimed squarely at anti-vaxxers.

Geopolitics 

According to a 539-page report by the US-China Economic and Security Review Commission, which was established by Congress especially to track and foresee Chinese threats, the Chinese Communist Party’s forceful behaviour is likely to intensify as the country’s leaders confront a gap between triumphalist rhetoric at home and challenges ranging from growing debt to technological reliance on the US and criticism of its handling of the Covid-19 pandemic. 

Even as ties between the world’s two largest economies have begun to warm in recent weeks, the report reveals the profound tensions that remain.

Commodities

After a few days of decline, gold prices are soaring today. The dollar index has reached new highs for the year, as traders expect the Federal Reserve to raise interest rates sooner rather than later. However, we have yet to receive a clear message from the Fed on the interest rate, and different members of the Fed committee have opposing viewpoints. For example, Chicago Federal Reserve President Charles Evans emphasised on Wednesday that the Fed’s bond-buying programme would not be completed until the middle of next year, even while the central bank monitors whether high inflation is subsiding as expected.

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