US Pre Market Open: Mid-terms and rate rise prospects pressure US stocks

Market Analysis /
05 Nov 2018

Friday’s impressive non-farm payrolls plus the risk of rising wages fuelling inflation served up a bout of selling for US equities going into the weekend break. Attempts at a rally fuelled by hopes of a US-China trade deal being struck have so far fallen short and with the odds of a December rate hike at the Fed continuing to shorten, there’s plenty of reason for the mood around equities to remain downbeat. Add to this tomorrow’s mid-term elections where there’s a real chance that Donald Trump could see the Republicans lose their majority in at least one of the two congressional chambers and uncertainty could well keep stocks on the back foot.

The big risk is that without the current level of support across the Capitol, Donald Trump’s ambitious policy reform is likely to be reigned in and it could also pave the way for an impeachment hearing. The accompanying uncertainty is seen as being negative for those recent flows we’ve been seeing into dollar denominated assets – including equities. In terms of the more routine fundamentals, non-manufacturing PMI data is slated for release shortly after the opening bell and this is expected to post a month-on-month decline, although remain well above the break even 50 mark. The potential here is more likely on the upside with a print above 60 likely to give some cause for cheer, even if it is only in the short term.

Ahead of the open we’re calling the DOW down 71 at 25200 and the S&P down 6 at 2717.

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