Record high inflation in Europe, as well as a renewed surge in global crude prices, has investors looking to the impact of searing consumer price increases on a wobbling global economy.
U.S. equity futures move lower Tuesday, taking investors into the final trading day of the month amid concern that central banks around the world are failing to get in front of an historic inflation swell that continues to pressure returns, and slow economic growth, in major world markets.
European inflation hit a fresh record high of 8.3% in May, data from the region’s statistics office indicated Tuesday, following figures from Germany on Monday that showed the fastest pace of consumer price increases in more than 50 years.
The surge looks set to continue, as well, after European Officials agreed to a plan that would curb around 90% of Russian crude exports into the region as part of a broader package of sanctions linked to its late February invasion of Ukraine.
The lingering inflation pressures prompted hawkish comments from Federal Reserve Governor Christopher Waller, as well, who told a conference in Frankfurt Monday that he saw “no point” in easing back from 50 basis point rate hikes “until we see substantial reductions in inflation” in the world’s biggest economy.
Fed Chairman Jerome Powell is also slated to meet President Joe Biden in the White House on Tuesday to discuss the state of inflation.
Stocks Lower As Inflation Roars, Week Ahead, Oil, Tesla and Top Gun – Five Things You Must Know
All that said, last week’s rally on Wall Street was the strongest in two months, and Bank of America’s Flow Show suggests nearly $22 billion has poured into U.S. equity funds, the most in more than 10 weeks.
Jobs data is also likely absorb some of the market’s inflation fears as investors look to Friday’s non-farm payroll report for a crucial indication of both consumer strength.
Employers are expected to have added 320,000 new jobs to the economy is May, a slower pace than the April tally of 428,000, which monthly wages set to rise 0.4%. The data, which will be preceded by figures from payroll provider ADP on Thursday, will also provide an indication as to the pace and speed at which Americans are willing to fill a near-record 11 million open position in the world’s biggest economy.
The U.S. dollar index, a good gauge of global risk appetite, edged 0.1% higher to 101.748 in overnight trading while benchmark 10-year Treasury bond yields — which move inversely to prices — rose to 2.828%.
In overseas markets, European stocks were weakened by the faster-than-expected inflation data, with the Stoxx 600 falling 0.16% in early early Frankfurt trading while the region-wide MSCI ex-Japan index gained 0.87% on the back of improving manufacturing data from China and reports that Shanghai’s two-month long Covid lockdown is set to end on June 1.
Global oil prices extended recent gains Tuesday after European Union officials reached an agreement to ban all imports of seaborne Russian crude over the next six months.
The decision, which followed weeks of political horse-trading with Hungarian President Viktor Orban, will exclude a pipeline into Budapest but effectively cover between 70% and 80% of Russia’s 2.3 million barrels in daily exports to the region.
WTI contracts for July delivery, which are tightly linked to U.S. gas prices, were marked $2.01 higher from Friday’s close at $118.87 per barrel. Brent crude contracts for the same month, the global pricing benchmark, were last seen $1.93 higher on the session at $123.60 per barrel.
Heading into the final trading day of May on Wall Street, futures tied to the Dow Jones Industrial Average indicating a 180 point opening decline while those linked the S&P 500 were priced for a 19 point move to the downside. Futures linked to the tech-focused Nasdaq, which id down 23.4% for the year, are looking at 3 point opening bell bump.
Tesla (TSLA) – Get Tesla Inc Report shares moved higher in pre-market trading following reports that the carmaker’s key Shanghai factory is moving close to pre-Covid output levels as the city looks to end its two-month lockdown.
AMC Entertainment (AMC) – Get AMC Entertainment Holdings, Inc. Class A Report shares powered higher in pre-market trading following a record-breaking Memorial Day weekend launch for Paramount’s blockbuster ‘Top Gun: Maverick” movie.
Comscore data showed Monday that Top Gun, starring Tom Cruise in a reprisal his iconic 1986 role as Navy fighter pilot Pete ‘Maverick’ Mitchell , earned more than $153 million over the four-day weekend, a tally that both topped the previous record set by “Pirates of the Caribbean: At World’s End” in 2007 and smashed industry forecasts.
Yamana Gold (YRI) shares were also active, surging 15% higher after the Canada-based gold producer agreed to a $6.7 billion takeover by South Africa’s Gold Fields (GFI) – Get Gold Fields Ltd. Report.
