Record high gas prices and surging energy costs could keep inflation levels elevated over the coming months as stocks look cautiously to tomorrow’s crucial May CPI reading.
U.S. equity futures edged cautiously higher Thursday as investors picked through a mixed set of headlines from China and eyed a key interest rate decision from the European Central Bank ahead of tomorrow’s crucial inflation reading.
A big rebound in China exports, which soared nearly 17% from last year in the month of May as factories roared back to life following the easing of Covid restrictions, was tempered by news that Shanghai is looking to resume lockdowns in the country’s biggest city following the identification of new Covid infections.
The news trimmed gains for both regional and European stocks, where investors are awaiting a major policy decision from President Christine Lagarde. No changes are expected in the ECB’s suite of record low interest rates, but traders are betting that its long-running quantitative easing program will come to an end, and rates hikes will be clearly forecasted for the end of summer as the region looks to tame record high inflation while gently protecting its modest growth prospects.
The region-wide Stoxx 600 was marked 0.47% lower in mid-day Frankfurt trading, following on form a 0.5% decline for Asia’s MSCI ex-Japan benchmark.
In the U.S, weekly jobless claims data will be published at 8:30 am Eastern time as investors adopt a cautious stance on risk ahead of tomorrow’s May inflation reading, which is expected to show a modest easing in core consumer price pressures.
Soaring oil and energy prices, however, will likely keep that headline rate unchanged at a near forty-year high of 8.3%.
U.S. gas prices, in fact, neared a record-high national average of nearly $5 a gallon Thursday as oil prices held nearly multi-week highs and the nation’s emergency crude stockpile fell to its lowest levels in more than three decades.
U.S. gasoline prices reached an all-time high of $4.970 per gallon yesterday, according to data from the AAA, 1.5 cents higher than Tuesday’s previous record and an eye-watering 62% higher than last year’s May average of $3.067 per gallon.
In global crude markets, WTI futures contracts for July delivery, which are closely linked to U.S. gas prices, were last seen 2 cents lower on the session at $122.13 per barrel, following the Energy Department data yesterday that showed stockpiles at the Strategic Petroleum Reserve now sit at the lowest levels since March of 1987.
Benchmark 10-year Treasury note yields were last seen little-changed from Wednesday’s close at 3.012% while the U.S. dollar index, which tracks the greenback against a basket of six global currencies, slipped 0.02% to 102.525.
On Wall Street, futures tied to the Dow Jones Industrial Average indicating a 150 point opening bell gain while those linked the S&P 500 are priced for a 20 point move to the upside. Futures linked to the Nasdaq are looking at 70 point opening bell gain.
Tesla (TSLA) – Get Tesla Inc. Report shares were the most active name in pre-market trading, rising 3.1% following data from China showing a solid rebound in May sales and exports from the world’s biggest car market and a price target boost and upgrade from UBS.
CVS Health (CVS) – Get CVS Health Corporation Report shared nudged 0.13% higher after the group reiterated its full-year profit outlook ahead of a series of investor meetings scheduled for the remainder of June.
Target (TGT) – Get Target Corporation Report shares also moved higher after the retailer boosted its quarterly dividend just days after warning that excess inventories and higher input prices would pressure near-term profit margins.
Twitter (TWTR) – Get Twitter Inc. Report shares, meanwhile, edged 0.17% higher after the micro-blogging website reportedly agreed to share a “firehose’ of data with Elon Musk in order to placate his concerns over the level of fake accounts and bots on the platform.
