FTSE 100 today: London markets set to open higher as yields retreat
Moving markets today: Asia stocks surge despite Wall Street stumble, Nasdaq sees largest monthly drop after tech sell-off; oil prices decline, China’s manufacturing contracts unexpectedly in May; Focus shifts to US PCE and eurozone inflation figures
US stocks ended the day with losses on Thursday, particularly in the tech sector, as seen in the Nasdaq’s drop of over 1 per cent, fuelled by disappointing forecasts from Salesforce. However, Asian markets showed gains on Friday, marking the fourth consecutive month of positive performance. Oil prices declined early on Friday following remarks from US Federal Reserve officials cautioning against premature interest rate cuts and a surprise increase in US gasoline stocks. Gold prices slightly increased ahead of impending inflation data, marking the precious metal’s fourth consecutive month of growth. Trump Media & Technology Group shares fell sharply after former President Donald Trump’s conviction for document manipulation related to a payment during the 2016 election. Additionally, Chinese manufacturing contracted in May, while core inflation in Tokyo accelerated, potentially influencing the Bank of Japan’s stance on interest rates. Investors are eagerly awaiting the latest US inflation figures against the backdrop of rising government bond yields. Here are five key takeaways for your day.
China’s manufacturing unexpectedly contracts in May
China’s manufacturing sector unexpectedly shrank, posing challenges for policymakers in the region’s largest economy. In May, the official purchasing managers’ index (PMI) dropped to 49.5, missing predictions and reversing the expansions seen in April and March. A PMI reading below 50 indicates a contraction compared to the previous month.
Against a backdrop of persistent issues like a slowing property market and subdued consumer demand, the Chinese government has underscored the importance of advancing high-value manufacturing. With a growth target of 5 per cent for the year, Beijing also unveiled new measures this month to support the real estate sector.
Tokyo’s core inflation rises, sustaining BOJ rate hike expectations
Core consumer inflation in Tokyo picked up in May due to rising electricity costs, but the inflation rate excluding fuel expenses slowed, adding uncertainty to when the central bank might raise interest rates.
Data released on Friday showed that Tokyo’s core consumer price index (CPI), a key indicator for the entire country, increased by 1.9 per cent compared to the previous year, up from April’s 1.6 per cent, and aligning with market forecasts. However, an alternative index that omits both fresh food and fuel costs, which the Bank of Japan (BOJ) uses to gauge broader price trends, rose by 1.7 per cent in May, slightly down from April’s 1.8 per cent.
In addition, separate data indicated a surprising 0.1 per cent decline in factory output for April, highlighting the fragile state of Japan’s economic recovery and disappointing policymakers who had hoped robust corporate activity would counterbalance weak household spending.
UK business optimism soars to eight-year high: Lloyds
British businesses are experiencing their highest level of confidence in eight years, with hiring plans reaching their strongest point since 2017, according to a survey released on Friday.
This surge in optimism, highlighted by the Lloyds Bank Business Barometer, which climbed eight points to 50 per cent in May—its highest since November 2015—signals a recovery in the economy as the national election approaches. This boost is attributed to reduced inflation and growing expectations of lower interest rates, with overall economic confidence at its highest since September 2021, Reuters reported.
What’s coming up
At the end of the week, everyone will be closely watching the latest US inflation figures, particularly due to the ongoing increase in government bond yields. The general expectation was that core PCE prices would hold steady at an annual rate of 2.8 per cent in April, though some economists predicted a slight drop to 2.7 per cent.
Inflation will also be a major focus in the Eurozone. Eurostat is expected to announce that the annual CPI increased from 2.7 per cent in April to 2.8 per cent in May. Additionally, Germany will release its import price and retail sales data for April.
In the UK, Nationwide will report its house price survey results for May, followed by consumer credit data from the ONS.
Asian stocks edge up ahead of key US PCE data
The S&P 500 fell by 0.60 per cent, closing at 5,235.48, while the Nasdaq Composite dropped by 1.08 per cent to 16,737.08. The Dow Jones Industrial Average decreased by 0.86 per cent, ending at 38,111.48. The technology sector in the S&P 500 took the biggest hit, falling 2.5 per cent, and the communication services sector was down 1.1 per cent. However, all other S&P 500 sectors saw gains.
Salesforce shares plunged 19.7 per cent following a forecast of lower-than-expected second-quarter profit and revenue due to weak client spending on its cloud and enterprise products. Shares of Trump Media & Technology Group fell 6.5 per cent after a New York jury found former President Donald Trump guilty of falsifying documents to conceal a payment to silence a porn star before the 2016 election.
Dell Technologies shares dropped over 12 per cent in after-hours trading after releasing its quarterly results, having already fallen 5.2 per cent during the regular session. Best Buy shares soared 13.4 per cent after reporting better-than-expected quarterly profits, while Kohl’s shares plummeted 22.9 per cent after lowering its annual sales and profit forecasts.
In Asia, Japan’s Nikkei rose 0.20 per cent and remained steady for the month. Chinese stocks also increased, with the blue-chip index up 0.23 per cent and Hong Kong’s Hang Seng index rising by 1.3 per cent.
The dollar index, measuring the US currency against six major counterparts, stood at 104.77 and was on track for a 1.5 per cent decline in May, ending a four-month winning streak.
In the commodities market, oil prices fell due to an unexpected increase in US gasoline stocks. Brent crude futures dropped 0.31 per cent to $81.61 per barrel, and US West Texas Intermediate (WTI) crude declined 0.36 per cent to $77.63 per barrel. Meanwhile, gold prices rose by 0.12 per cent to $2,345.93, aiming for a gain of over 2 per cent in May.