Moving markets today: Asian markets pause post-rally; oil surges, UK retail costs fall; focus shifts to US GDP and PCE inflation
Asian markets showed a mixed performance on Tuesday following a recent rally, with growing speculation of a potential rate cut in Europe boosting investor sentiment ahead of significant inflation data. Oil prices remained stable during early Asian trading as investors awaited inflation updates to gauge future US monetary policies, along with decisions from the OPEC+ meeting scheduled for June 2 regarding production strategies. Gold prices held steady. As the UK election draws nearer, shop inflation in the country has returned to normal levels. Meanwhile, Japan witnessed the fastest annual increase in business service prices since March 2015. European Central Bank policymakers have indicated that there is flexibility to lower rates but advised a cautious approach. This week’s economic calendar features several important updates, including revised Q1 GDP figures from the US and Q4 data from India. Additionally, the US Fed’s core PCE price index for April will be released. As the earnings season comes to a close, only a handful of major reports are anticipated, including those from Dell, Best Buy, and Costco. Here are five key takeaways for your day.
UK retail prices plummet to two-year low in early May
UK retailer price increases hit their lowest level in over two years in early May, signalling a brighter economic outlook. The British Retail Consortium reported a slowdown in shop price rises to 0.6 per cent, the lowest since late 2021. This dip was below the category’s three-month average of 0.9 per cent and last month’s 0.8 per cent. Additionally, inflation in other BRC-NielsenIQ index categories is dropping, with food prices seeing a decrease to 3.2 per cent from 3.4 per cent the previous month.
Japanese business service prices soar to highest annual rate since March 2015
Data from the Bank of Japan released on Tuesday revealed that in April, Japanese corporate service prices experienced their most substantial increase since early 2015. This uptick was largely driven by higher labour costs within the services sector, which is seen as a positive indicator for policymakers seeking to stimulate demand growth through wage-led cycles, Reuters reported.
The Corporate Services Price Index (CSPI) showed a year-on-year rise of 2.8 per cent in April, up from a 2.4 per cent increase in the preceding month. On a monthly basis, service prices rose by 0.7 per cent compared to March, although this growth rate was slightly slower than the 0.9 per cent seen in the previous month.
ECB policymakers signal potential for rate reductions, but with caution
Overnight, a number of European Central Bank officials emphasized that the ECB still has room to lower interest rates amidst a slowdown in inflation. This reinforces the anticipation of a rate cut on June 6. As attention now turns to future decisions, the market has fully incorporated expectations of two rate reductions by October this year, Reuters reported.
French central bank governor, Francois Villeroy de Galhau, expressed confidence in an imminent rate cut in June, stating that it’s almost certain. However, he noted that there are various options to consider for subsequent actions.
Meanwhile, ECB chief economist Philip Lane struck a more cautious tone, highlighting the risk of waiting too long to implement easing measures, which could potentially lead to inflation dropping below the desired target.
What’s coming up
This week’s economic data releases will come at a steady pace. Key updates include revised first-quarter GDP figures from the US on Thursday and fourth-quarter figures from India on Friday. Additionally, the US Federal Reserve’s preferred inflation measure, the core personal consumption expenditure (PCE) price index for April, is set to be published on Friday, May 31.
With the current earnings season winding down, there will be only a few notable reports, including those from Dell, Best Buy, and Costco.
Wednesday is a crucial day for BHP, as it faces a 5 pm BST deadline to make a final bid for Anglo American. This follows last week’s extended takeover discussions, despite Anglo American rejecting BHP’s third £38.6 billion offer, the FT reported.
Also on Wednesday, a major cryptocurrency event, CoinDesk Consensus, will take place.
Asian markets stall after rally; Attention turns to FTSE and Wall Street reopenings
Asian stock markets saw little movement in early trading on Tuesday. Hong Kong’s Hang Seng Index led the region with a 0.8 per cent increase, primarily driven by gains in Chinese technology stocks, which pushed the Hang Seng Tech Index up by 1.3 per cent. Meanwhile, South Korea’s Kospi Index remained flat despite the government’s announcement of upcoming tax incentives to boost market valuations.
Japan’s Nikkei N225 slipped by 0.3 per cent, erasing some of the gains from the previous day’s 0.7 per cent increase.
In the US, Wall Street futures improved ahead of the market reopening after a public holiday. S&P 500 futures rose by 0.1 per cent, and Nasdaq futures were up by 0.2 per cent as investors awaited comments from Federal Reserve officials on interest rate outlooks.
Australia’s S&P/ASX 200 Index fell by 0.2 per cent following the release of data showing weak retail sales growth in April.
Oil prices held steady, with Brent crude inching up by 0.1 per cent to $83.19 per barrel. Gold prices continued their upward trend for the third consecutive day, increasing by 0.1 per cent to $2,354.23 per ounce.