Dow, S&P 500 and Nasdaq seen opening lower after last week's gains

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6.30am: Quiet start

US stocks are expected to open lower on Monday after last week’s strong gains in the wake of softer-than-expected inflation data for October, which strengthened expectations that US rate setters will scale back on interest rate hikes.

Futures for the Dow Jones Industrial Average were 0.3% lower in pre-market trading, while those for the S&P 500 were down 0.4%, and contracts for the Nasdaq-100 fell 0.7%. 

“Market mood outside crypto is extremely joyful after last week’s inflation data surprised investors to the downside and China announced to relax Covid measures, and boost its shattered property sector,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

“Although US inflation remains relatively high to contain a perhaps premature bull run on dovish Fed expectations, news from China could help keep the mood nice and sweet,” she added.  

Notably, US president Joe Biden and China’s president Xi Jinping will hold talks today on the sidelines of the G20 summit in Bali. Talks could go either way; they could either boost, or hit risk appetite in Chinese, and global assets. Investors will be watching developments closely.

The path for US interest rates continues to have a big impact on share prices. The Federal Reserve has delivered four 75 basis point interest rate hikes this year as it tries to fight runaway inflation.

Investors worry that the higher cost of borrowing will dent economic growth. While inflation remains elevated, it is starting to show signs of a softening. In data out last week, headline inflation fell to 7.7% in October, versus 8.0% expected by analysts and from 8.2% printed a month earlier, stoking expectations that US rate-setters will scale back on further interest rate hikes.

Contact the author at jon.hopkins@proactiveinvestors.com