Here are five things you must know for Monday, June 6:
1. — Stock Futures Higher On ‘Goldilocks’ Bets
U.S. equity futures moved higher Monday, while the dollar eased modestly against its global peers, as investors headed into a week bereft of earnings and economic data focused firm on inflation prospects in the world’s biggest economy.
Surging crude, alongside ongoing supply-chain disruptions and higher food prices, continues to add upward pressure to global inflation readings, with G-7 average now sitting at a record high of 9.2%.
In the U.S., however, broader economic growth continues to surprise to the upside even in the face of the fastest inflation in forty years, with last week’s May jobs report showing a small moderation in monthly wage gains amid a bigger-than-expected 390,000 increase in headline employment. ISM data also noted a faster-than-forecast pace for manufacturing activity last month.
Those readings have given rise to bets that the Fed can ‘thread the needle’ in terms of lifting rates high enough to snuff out inflation, but not so high as to choke-off economic growth.
Data later this week will confirm the pace of May price increases, which economists are forecasting held at an annual rate of 8.3%.
Weekend comments from Commerce Secretary Gina Raimondo, who suggested President Joe Biden could remove some Trump-era tariffs on China-made imports, added a tailwind to sentiment, although a much weaker-than-expected reading for services sector growth in the world’s second largest economy, which is still suffering the effects of Beijing’s ‘Zero Covid’ lockdown policies.
China shares got a boost, however, on renewed bets of fresh stimulus from Beijing, helping the region-wide MSCI ex-Japan benchmark to a 0.77% gain heading into the close of trading. Japan’s Nikkei 225 closed 0.56% higher, paced by the energy sector, at 27,985.89 points.
In Europe, the region-wide Stoxx 600 gained 0.9% while Britain’s FTSE 100 was marked 0.98% higher despite news of a ‘no-confidence’ vote on the leadership of Prime Minister Boris Johnson.
In the U.S., benchmark 10-year Treasury notes yields crept higher, to 2.961%, during European trading hours while the dollar index, which tracks the greenback against a basket of its global peers, was marked 0.28% lower at 101.855 points.
On Wall Street, futures contracts tied to the Dow Jones Industrial Average are indicating a 250 point opening bell advance while those linked the S&P 500, which is down 13.8% for the year, are priced for a 40 point move to the upside. Futures linked to the Nasdaq are looking at 160 point opening bell gain.
2. — Week Ahead: Inflation In Focus As Fed Meeting Looms
Friday’s May inflation reading will highlight a quiet week for earnings and data releases, although the assessment remains crucial for market direction heading into the summer months.
With the Federal Reserve set for its June policy meeting beginning on June 12, the Commerce Department’s May CPI reading offers policymakers a final look at inflation momentum as they ponder the impact of successive rate hikes on both consumer price dynamics and the broader economy.
Analysts are looking for a headline reading of 8.3%, essentially unchanged from April, with modestly moderating core prices on both a monthly and annual basis.
The CME Group’s FedWatch tool still suggests a 94.2% chance of a 50 basis point rate hike next week, which would take the Fed’s target rate to a range of 1.25% to 1.5%, with traders then wondering if inflation will pressures will accelerate — leading to bigger hikes in the near-term — or moderate — suggesting the prospect of a ‘pause’ in Fed move later this fall.
Tesla (TSLA) – Get Tesla Inc Report shares were active once again in pre-market trading, rising 3.8%, after CEO Elon Musk appeared to reverse course over the weekend on her earlier warning of job cuts at the clean-energy carmaker.
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Musk, who had told employees to expect a 10% cut in salaried positions at Tesla as a result of the growing uncertainty in the global economy and “overstaffing” around some of its key locations, Tweeted over the weekend that he is probably more likely to expand headcount by 10% this year in the latest mercurial missive from the world’s richest man.
Musk’s earlier warning, in the form of a company-wide email, comes amid what is likely to be a grim quarter for Tesla, which has seen its Shanghai factory close for 22 days, with slowing output on its re-opening, thanks to the city’s strict Covid lockdown.
Deliveries are likely to be impacted, and the group will also need to take a notable write-down on its $1.5 billion in bitcoin holdings, which are down 33% since the end of March.
Zoom shares were marked 3.8% higher in premarket trading to indicate an opening bell price of $730.50 each.
4. — Apple Shares Gain Ahead of Developers’ Conference Keynote
Apple (AAPL) – Get Apple Inc. Report shares bumped higher in pre-market trading ahead of the tech giant’s closely-watched developers conference, which begins later today at its California campus.
The worldwide developers conference, WWDC, is often the event during which Apple unveils big announcements linked to its software and product releases, as well as changes to its existing line-up of iPhones, Apple Watches, Mac Books and iPads.
One area of interest in this year’s event will be changes to Apple’s new operating system, iOS16, and the introduction of an ‘always on’ feature for the new line-up of iPhone 14s expected in the autumn.
Investors and consumers will also be focused on any updates from Apple’s investments in augmented reality and artificial intelligence efforts, and perhaps even a new next-generation MacBook Air.
This year’s WWDC, which will again be a virtual-only affair, kicks-off with a keynote address set for 10:30 am Pacific Time.
Apple shares were marked 1.36% higher in premarket trading to indicate an opening bell price of $147.35 each.
5. — Boris Johnson Faces No Confidence Vote Following ‘Partygate’ Scandal
U.K. Prime Minister Boris Johnson will face a no-confidence vote later today that could end the controversial leader’s three-year tenure at Downing Street.
Johnson, who represents Britain’s Conservative Party, was told today that more than 54 Parliamentary colleagues had signed a letter seeking his removal, a level which tops the threshold needed for a vote of ‘no-confidence’ from elected party members.
In order to remain in office, Johnson needs the support of at least 50% of Conservative lawmakers, plus one, setting a threshold of 180 votes. If he gains those votes, he cannot be challenged for at least another year, if he loses, he could be removed from office following a leadership contest.
“The PM welcomes the opportunity to make his case to MPs and will remind them that when they’re united and focused on the issues that matter to voters there is no more formidable political force,” Johnson’s spokesperson told the media Monday.
The challenge to his leadership was triggered by a series of scandals, known as ‘partygate’, linked to his administration’s rule-breaking on social gatherings during the peak of the 2020 pandemic.
Johnson was ultimately fined by the London Metropolitan Police, and was forced to apologize in Parliament for misleading lawmakers by making statements that indicated no rules had been broken.