Stock futures lower as inflation fears resurface; Week Ahead: jobs data in focus as earnings peter out; Oil prices leap after EU agrees ban on seaborne Russian crude; Tesla shares higher as Shanghai lockdown nears end and AMC shares leap as Top Gun: Maverick has record memorial day weekend
Here are five things you must know for Tuesday, May 31:
1. — Stock Futures Lower As Inflation Fears Resurface
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.
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.
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.
Heading into the final trading day of May on Wall Street, futures tied to the Dow Jones Industrial Average indicating a 225 point opening decline while those linked the S&P 500 were priced for a 27 point move to the downside. Futures linked to the tech-focused Nasdaq, which id down 23.4% for the year, are looking at 45 point opening bell dip.
2. — Week Ahead: Jobs Data In Focus As Earnings Peter Out
Jobs data will take center-stage on Wall Street this week as investors look to Friday’s non-farm payroll report for a crucial indication of both consumer strength and the added pressures wages may have on the country’s elevated inflation rate.
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 jobs data caps an otherwise quiet week on Wall Street, with few economic releases and just 7 S&P 500 earnings, including Salesforce CRM, HP Enterprises HPE and Lululemon Athletic LULU.
Refinitv data shows first quarter earnings grew 11.2% from last year to a collective $453.12 billion, but that pace is expected to slow to 5.4% over the three months ending in June, taking the share-weighted total to $464 billion.
3. — Oil Prices Leap After EU Agrees Ban on Seaborne Russian Crude
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.
“This move is supportive for prices. However, the market has had a month to digest the potential ban, and so we suspect it is largely priced in already,” said ING’s head of commodity strategy Warren Patterson. “This is reflected in the price action in early trading in Asia this morning.”
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.
In the U.S., gas prices hit yet another nominal record high Tuesday with the AAA indicating a nationwide average price at the pump of $4.622 per gallon.
4. — Tesla Shares Higher As Shanghai Lockdown Nears End
Tesla TSLA 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.
Gigafactory 3, as the Shanghai plant is known, will hit 70% of its pre-Covid output pace of around 2,600 cars per week this week, Reuters reported Tuesday citing a company memo. The 22-day shutdown, as well as lingering delays linked to Shanghair’s lockdown, will take its toll on Q2 deliveries, however, with Jefferies analyst Philippe Houchois forecasting a worldwide tally of 275,000, down 11.3% from the record 310,000 Q1 total.
Recent data from the China Passenger Car Association (CPAC) showed Tesla produced just 10,757 cars in the world’s biggest market last month, the lowest in two years.
Tesla shares were marked 1.5% higher in premarket trading to indicate an opening bell price of $770.84 each.
5. — AMC Shares Leap As Top Gun: Maverick Has Record Memorial Day Weekend
AMC Entertainment AMC 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.
AMC shares were marked 3.05% higher in pre-market trading to indicate an opening bell price of $14.87 each.
