21.11.202214:15 Forex Analysis & Reviews: US premarket on November 21: China again affects investors' plans

US stock futures opened lower amid fears that China may again tighten COVID-19 restrictions, following a series of reports on the increase in fatalities over the weekend. The S&P 500 and Nasdaq 100 futures contracts were down 0.5% and 0.7% respectively. The Dow Jones Industrial Average dropped by 0.2%. European stocks also saw a slight sell-off, only worsening investor sentiment, which is gradually deteriorating as winter and cold weather arrive in the EU countries.

The US dollar increased dramatically against risky assets, while Treasury yields did not change significantly after a sharp rise at the end of last week. Oil prices also declined on concerns about weakening China's demand due to coronavirus problems.

As I noted above, China registered its first Covid-related death on Saturday, followed by two deaths on Sunday. These are the first deaths after a six-month hiatus. The surge in coronavirus outbreaks across the country has raised fears that the Chinese government could again impose severe restrictions. The authorities of a small city near Beijing, rumored to have been chosen as a test case for lifting all restrictions, again suspended all classes at schools and universities and asked the residents to stay home for five days.

Amid this news, financial markets expressed concern over fears that rising coronavirus cases in China and the new tightening of COVID-19 restrictions will cause further problems in supply chains and significantly affect production and demand for raw materials.

As for the future outlook for the stock market, strategists at Goldman Sachs Group Inc. said that investors hoping for 2023 would be disappointed as the bear market was not over yet. They wrote in a note on Monday that the conditions indicated that the market had bottomed out had not yet been met. Traders should notice peak interest rates and lower economic valuations reflecting a recession. Then a sustained stock market recovery is possible

Notably, this week traders will mainly focus on the minutes of the Federal Reserve's latest policy meeting, which will give them more clues as to the pace of rate hikes in the near future.

Moreover, there are some Fed's members who are betting on a less aggressive approach. Atlanta Fed President Rafael Bostic said recently that he backed slowing the pace of interest rate increases. He added that the rates should be raised by 0.5% in December. Boston Fed President Susan Collins also noted that the amount of the interest rate hike in December continues to be debated by policymakers. Asian markets also saw a sell-off as investors seriously questioned whether the recent rally was exaggerated, especially amid renewed troubles in China.

As for the technical picture of the S&P500, after Friday's surge and a slight rise, the pressure on the index has resumed. Buyers are mainly focused on defending the support of $3,942. While trading will be conducted above this level, further demand for risky assets is likely. This will create good chances for strengthening of the trading instrument and return under the control of $3,968 and $4,003. The level of $4,038 is slightly higher. If it will be broken through, a further upward correction to the resistance of $4,064 is possible. The distant target is the area of $4,091. In case of downtrend, buyers should be active at $3,942. A breakout of this range will quickly push the trading instrument to $3,905 and also open a possibility to renew the support at $3,861.