MARKET WRAPS
Watch For:
U.K. unemployment; Germany CPI, ZEW Indicator of Economic Sentiment; trading updates from Flutter Entertainment, Vodafone Group, DCC, Euronext, Currys, Hannover Rueck, Bayer, Veolia Environnement,
Opening Call:
Stock futures were tracking lower early Tuesday with the market focus on U.S. inflation data. In Asia, stock benchmarks were mixed; Treasury yields broadly edged lower; the dollar gained; oil and gold also advanced.
Equities:
European shares are expected to open lower as markets brace for fresh inflation data and digest Fed officials' comments.
Fed Chairman Jerome Powell is due to speak later in the day. On Monday, Fed Vice Chair Philip Jefferson said that with the economy in a solid position in terms of job growth, the Fed can focus "even more so" on inflation and keep rates higher for longer.
Traders and money managers will get their next look at how U.S. inflation is faring with the release of the producer-price index on Tuesday, followed by the highly anticipated consumer-price index on Wednesday.
"I think we're really just all in wait-and-see mode," said Dan Eye, chief investment officer at Fort Pitt Capital Group. "No big bets ahead of the CPI report."
"We're trading at levels now that if the interest rates are not cut...the market is going to grow very slowly from here," said Dan Genter, chief executive and chief investment officer at Genter Capital Management.
Forex:
The dollar strengthened slightly, with a focus on U.S. inflation data.
TD Securities continues to favor the U.S. dollar over other G-10 currencies due to relatively higher inflation in the U.S. versus other countries.
U.S. economic growth remains better relatively too, even if its strength has ebbed a little, which underscores "a growth and inflation edge and source of support that should anchor the dollar," it added.
Bonds:
Treasury yields edged slightly lower in Asia amid a lack of market-moving catalysts and ahead of the U.S. producer-price data for April due today and the CPI and retail sales data on Wednesday.
April's producer price index is forecast at 0.3%, up from March's 0.2%, in a Wall Street Journal survey with economists. Ex-food and energy, the PPI index is expected to be stable at 0.2%.
"Any further upward surprises would probably lead to a significant rethink to the Fed's path of rates over the remainder of the year. Consequently, we expect to see quite a bit of volatility right after the publication of the numbers on Wednesday," said Roman Ziruk, senior market analyst at London-based financial services firm Ebury.
Energy:
Oil futures were higher as traders weighed signs of soft fuel demand against expectations that OPEC and its allies will extend production cuts into the year's second half.
Robert Yawger, director of energy futures at Mizuho Securities said he believes "lifting the voluntary cuts runs a strong risk of cratering crude oil prices."
OPEC+ ministers are due to meet June 1. A round of voluntary production cuts is set to expire at the end of next month. Monthly reports - including updated supply and demand estimates - from OPEC and the Paris-based International Energy Agency are due this week.
Metals:
Gold gained in Asia. The precious metal was likely to find buyers on dips, said Fawad Razaqzada, market analyst at City Index and forex.com.
Gold's trend remains bullish, he said, adding that it wouldn't be surprising to see gold gradually erode the next resistance zone around $2,360/oz-$2,380/oz.
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Copper rose in Asia. The base metals market was moderately bullish so far this week, Daria Efanova, head of research at Sucden Financial said.
The sentiment was being supported by news that China will start selling its first batch of a planned CNY1 trillion worth of ultralong bonds as it looks to support economic growth amid a continued property sector slump, she said.
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Iron ore declined amid high stockpiles as global iron-ore shipments and arrivals at Chinese ports remain at high levels, Guangfa Futures analysts said.
Iron ore prices will likely remain volatile as investors watch steel demand and the pace of destocking, they said.
China's increasing spending on infrastructure and the loosening of restrictions on residential housing should boost some demand for steel and iron ore, ANZ Research said.
TODAY'S TOP HEADLINES
Fed's Jefferson says slowing progress on inflation is 'a source of concern'
The slowing progress on inflation in the first quarter is disappointing, but the healthy labor market allows the Federal Reserve to maintain downward pressure on demand until price pressures cool, Federal Reserve Vice Chair Philip Jefferson said on Monday.
The "attenuation" in the progress on bringing down inflation that has been seen in the first three months of the year "is a source of concern, " Jefferson said in brief comments regarding the current economy after a speech on communication strategy at the Cleveland Federal Reserve Bank.
Are Shoppers Really Pulling Back? Retail Earnings Will Offer Clues.
The country's largest retailers, including Home Depot, Walmart, and Target, will report fiscal first-quarter earnings in the next few weeks. Their results could confirm a growing concern: that after years of supercharged spending, U.S. consumers are finally losing steam.
Consumer outlays account for roughly 70% of U.S. gross domestic product. Consumption has underpinned the economy's rapid growth in the past four years, defying expectations that higher inflation and interest rates would curb Americans' appetite for spending.
Berkshire Hathaway's Mystery Stock Purchase Could Be Revealed on Wednesday
Berkshire Hathaway's "mystery" stock that the company began accumulating in the second half of 2023 could be revealed when the company releases its first-quarter equity holdings on Wednesday-likely after the close of trading.
That stock-Barron's is assuming it is just one-likely is a financial stock based on disclosures in Berkshire Hathaway's regulatory filings including its first-quarter 10-Q released earlier in May. Barron's has speculated it could be BlackRock, Morgan Stanley, or Chubb. Berkshire CEO Warren Buffett didn't disclose the stock at the company's annual meeting on May 4.
The economy could be heading toward 1970s-style stagflation. What it means for the stock market.
The U.S. economy could be barreling toward 1970s-style stagflation amid a cooling economy and sticky inflation - and it could end up sparking a double-digit plunge in stocks, according to Sevens Report Research.
"Stagflation doesn't have to be as bad as it was in the 1970s, but for a stock market that's trading above 21 times earnings, the truth is that even a small bout of stagflation would result in a 10%-20% decline in stocks," said Tom Essaye, founder of Sevens Report Research, in a Monday note.
Israel's Rafah Offensive Strains 45 Years of Peace With Egypt
In the almost 45 years since their historic peace deal, Israel and Egypt have become essential partners, a close though never warm relationship that underpins both countries' national security. Israel's Rafah offensive is threatening to undo all of that.
Egypt, a center of Arab military, political and cultural power, is now considering a downgrade to its diplomatic ties with Israel, Egyptian officials say. Egypt has in recent days said it would join South Africa's court case charging Israel with genocide. And Egypt has refused to reopen its border with Gaza after Israeli forces seized the Palestinian side of the crossing.
The Misfits Russia Is Recruiting to Spy on the West
WARSAW-Low on cash and out of his most recent minimum-wage job, Ukrainian refugee Maxim Leha, then 22, had just found a new way to make ends meet in his newly adopted home of Poland.
The job advertised on the Telegram messaging app in early 2023 didn't appear to demand much: Spray-paint graffiti on remote fences and highway underpasses for $7 a pop. When Leha answered, a man who identified himself as Andrzej wrote back. Within days, Andrzej had upped the ante: Leha was fixing cameras along railroad lines carrying Western military aid to neighboring Ukraine.
U.K. Charges Three With Spying Linked to Hong Kong
LONDON-U.K. police charged three men on Monday, including a U.K. Border Force official and a former Royal Marines commando, with allegedly helping Hong Kong's intelligence services spy on dissidents based in Britain.
The prosecution is one of the most high-profile efforts by British authorities to curtail alleged Chinese spying on U.K. soil, with a trial that is expected to shine a light on the lengths the Chinese state goes to pursue members of its diaspora.
Walmart to Lay Off and Relocate Workers
Walmart is cutting hundreds of corporate jobs and asking most remote workers to move to offices, according to people familiar with the matter.
In addition, workers in small offices in Dallas, Atlanta and Toronto are being asked to move to other central hubs like Walmart's corporate headquarters in Bentonville, Ark., as well as Hoboken, N.J., or Northern California, said one of the people familiar with the matter. Walmart will still allow staff to work remotely part of the time, as long as they are in offices the majority of the time.
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Expected Major Events for Tuesday
04:30/NOR: 2Q Consumer Confidence
05:00/FIN: Apr CPI
06:00/GER: Apr CPI
06:00/ROM: Apr CPI
06:00/ROM: Mar Industrial Production
06:00/UK: Apr UK monthly unemployment figures
06:30/SWI: Apr Import Price Index
06:30/SWI: Apr PPI
07:00/SPN: Apr CPI
07:00/SVK: Apr Core & net inflation development
07:00/SVK: Apr CPI
08:00/CZE: Mar Monthly Balance of Payments
09:00/GRE: Apr CPI
09:00/GER: May ZEW Indicator of Economic Sentiment
12:00/POL: Mar Balance of Payments
16:59/AUT: May OPEC Monthly Oil Market Report
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05-14-24 0015ET
