U.S. stock futures went up on Monday, while the dollar went down slightly against its peers around the world. This was because investors were getting ready for a week with no earnings reports or economic data, so they were focusing on inflation in the world’s biggest economy.
Along with supply-chain problems and higher food prices, rising crude prices continue to push up global inflation numbers. The G-7 average is now at a record high of 9.2 percent.
In the U.S., however, broader economic growth continues to surprise to the upside, even though inflation is rising at its fastest rate in forty years. Last week’s May jobs report showed a small slowdown in monthly wage gains, but a bigger-than-expected 390,000 increase in headline employment. ISM data also showed that manufacturing went faster than expected last month.
Because of these numbers, people are betting that the Federal Reserve can “thread the needle” by raising interest rates just enough to stop inflation without stopping economic growth.
The Fed’s policy meeting for June starts on June 12. The May CPI reading from the Commerce Department gives policymakers one last look at inflation momentum as they think about how successive rate hikes will affect consumer prices and the economy as a whole.
Analysts expect the headline number to be 8.3%, which is about the same as in April, with core prices going down slightly both monthly and annually.
The CME Group’s FedWatch tool still shows that there is a 94.2 percent chance of a 50 basis point rate hike next week. This would bring the Fed’s target rate to a range of 1.25 percent to 1.5 percent. Traders then wonder if inflationary pressures will increase, which would lead to bigger rate hikes in the near future, or if they will ease, which would make it possible for the Fed to “pause” later this fall.
Commerce Secretary Gina Raimondo’s comments over the weekend that President Joe Biden might remove some of Trump’s tariffs on Chinese imports helped boost sentiment. However, a much weaker-than-expected reading for services sector growth in the world’s second largest economy, which is still feeling the effects of Beijing’s “Zero Covid” lockdown policies, hurt the mood.
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China shares, on the other hand, got a boost from new bets on more stimulus from Beijing. This helped the regional MSCI ex-Japan benchmark gain 0.77 percent as trading came to a close. Japan’s Nikkei 225 closed up 0.56 percent at 27,985.89 points. The energy sector led the way.
Europe’s Stoxx 600 was up 0.86 percent by midday in Frankfurt, and Britain’s FTSE 100 was up 0.98 percent, even though there was news of a “no-confidence” vote in Prime Minister Boris Johnson’s leadership.
Johnson, who is a member of the Conservative Party in Britain, found out today that more than 54 of his Parliamentary colleagues had signed a letter asking for his removal. This is more than the number of signatures needed for a vote of “no-confidence” from elected party members.
Johnson needs the support of at least 50 percent of Conservative lawmakers, plus one, to stay in office. This makes the number of votes he needs to stay in office 180. If he gets those votes, he can’t be challenged for at least another year. If he loses, he could be removed from office after a leadership contest.
During European trading hours, the benchmark yield on 10-year U.S. Treasury notes crept up to 2.961 percent, while the dollar index, which measures the greenback against a basket of its global peers, fell 0.28 percent to 101.855 points.
Futures contracts for the Dow Jones Industrial Average are priced for a 280-point gain at the opening bell, while those for the S&P 500, which is down 13.8% for the year, are priced for a 45-point gain. Futures tied to the Nasdaq are expected to rise by 185 points when the market opens.
Tesla (TSLA) – Get Tesla Inc Report shares were traded again before the market opened, and they went up by 3.8% after CEO Elon Musk seemed to change his mind over the weekend about his earlier warning about job cuts at the company.
Amazon (AMZN) – Get Amazon.com, Inc. Report shares were also in the green, going up 1.4% before their first day of trading after a 20-for-1 stock split last week. Each share is likely to start trading at $124.17.
Apple (AAPL) – Get Apple Inc. Report shares went up 1.4% before the tech giant’s developers conference, which starts later today at its California campus and is being watched by a lot of people.
Eli Lilly (LLY) – Buy or Sell Eli Lilly and Company Report shares also went up after the company released the final results of a large clinical trial that showed people with type 2 diabetes were less likely to have heart failure.