1. Attention turns to deluge of U.S. data
Among the downpour of U.S. economic data due on Friday, investors will focus on retail sales for November, due at 8:30 AM ET (13:30 GMT) on Friday, as they look for further signs on the strength of the American consumer.
The consensus forecast is that the report will show retail sales rose 0.1% last month, after a 0.8% increase in October. Excluding the automobile sector, sales are expected to increase 0.2%.
Rising retail sales over time correlate with stronger economic growth, while weaker sales signal a declining economy. Consumer spending accounts for as much as 70% of U.S. economic growth.
Also on the economic calendar, traders await industrial production for November at 9:15 AM ET (14:15 GMT) and preliminary purchasing managers’ indices for the manufacturingand services sectors in December from IHS Markit at 9:45 AM ET (14:45 GMT).
2. Weak growth figures from China, Europe add to investor malaise
While waiting for the U.S. data, economic indicators elsewhere spooked investors in overnight trade on Friday.
China’s worse-than-expected retail sales saw their weakest growth in 15 years, while industrial output rose the least in nearly three years, casting further doubt over demand in the world’s second largest economy.
Japanese business confidence and plans for capital expenditures managed to hold steady in December, but the Bank of Japan’s Tankan survey released overnight showed companies expect conditions to worsen in the next three months.
Over in Europe, data from the euro zone revealed the weakest business activity in the private sector in just over four years, highlighting the slowing growth in the region.
The Bundesbank also warned Friday that growth in Germany, the motor of the euro area economy, will slow in the coming years, coming on the back of remarks made by European Central Bank president Mario Draghi on Thursday that risks to the economic outlook for the region were tilting to the downside.
3. Global stocks tumble over economic concerns
The downbeat mood spread to Europe where the region’s own weak data only added pessimism to the selloff. With all of the major European indices in the red, the pan-European Stoxx 600 fell 0.98% by 5:38 AM ET (10:38 GMT).
U.S. stock futures pointed to a lower open on Friday as investors shared in the worries over the global economy. At 5:40 AM ET (10:40 GMT), the blue-chip Dow futures fell 221 points, or 0.90%,S&P 500 futures lost 23 points, or 0.88%, while the Nasdaq 100 futurestraded down 71 points, or 1.06%.
4. Risk of U.S. recession jumps to highest level since financial crisis
Amid worries over the global economy, the risk of a recession in the U.S. during the next two years jumped to 40%, according to a recent Reuters survey.
That was compared to the 35% seen when the poll was conducted in November and was the highest level since January 2008, just months before the beginning of the financial crisis that led to the Great Recession.
As market attention shifts to the Federal Reserve’s monetary policy decision next week, economists have been ratcheting down expectations that the central bank will be able to continue the current pace of rate hikes next year.
While markets widely anticipate that the Fed will hike rates by a quarter point at next week’s meeting, they are pricing in just one further increase in 2019.
5. Oil dips after boost from supply deficit hopes
Oil prices headed lower on Friday as investors took profit after a nearly 3% surge in the prior session. Thursday’s boost was thanks to updated forecasts from the International Energy Agency (IEA) which said it expects a supply deficit in the second quarter of 2019 if OPEC and its allies move forward with plans to reduce output starting in January.