US equities rose on Tuesday ahead of key inflation data tonight with investors brushing off a mixed producer price inflation print.
United States
While producer prices rose 0.5% in excess of the 0.3% forecast several components which are using to calculate PCE inflation eased. Although prices increased at the highest level since April 2023, the 2.2% increase over the year was in line with forecasts. Attention now turns to tonight’s consumer price inflation data, expected to show a 3.4% increase in headline prices over the year and 3.6% increase in core prices.
The S&P500 advanced 0.48% driven by gains in technology 0.93% and financials 0.48%. The Dow Jones also rose 0.32% along with the Nasdaq Composite 0.75% and Russell 2000 1.14%. Speaking on Tuesday, Fed Chair Jerome Powell said policymakers need to be patient and wait for evidence of inflation continuing to cool, in line with previous comments that rates will need to remain higher for longer adding “It looks like it will take longer for us to become confident that inflation is coming down to 2 per cent over time”.
Europe
European equities extended gains for an eighth consecutive session on Tuesday with the Euro Stoxx 600 up 0.15%. The CAC also gained 0.2% along with the FTSE100 0.16% while the DAX was -0.14% lower. European equities are performing well this year, up nearly 9% so far, which according to some analysts is driven by cheaper valuations and a brighter economic backdrop. The Pound rose 0.25% overnight to 1.2590 after employment for March showed a smaller-than-expected decrease of -178k vs -215k forecast, while the unemployment rate edged up to 4.3% from 4.2% as forecast. Economic sentiment for the Eurozone in May increased more than forecast to 47 from 43.9 previously, this compares to estimates of 46.1 with a similar increase in Germany’s measure. In focus tonight is the second estimate of Q1 GDP for the Eurozone, expected to show a 0.3% increase.
Australia
The ASX is expected to rise this morning with ASX200 futures up 36 points or 0.46% to 7,799. The index posted a modest loss of -0.3% on Tuesday with materials -0.36% and financials -0.26% weighing the most in terms of index points. In focus after the close of the market was the latest Federal budget, where net spending will increase by over $24 billion in the next four years. This includes a $7.8 billion cost-of-living package which includes power price discounts effective from July 1st this year and $1.9 billion in rent assistance. In focus this morning is the latest wage price data for Q1, forecast to show a 4.2% increase year-on-year.
Commodities
Oil prices are lower overnight with both WTI and Brent crude down -0.85% and -0.72% to US$78.44 and US$82.74 a barrel. Iron ore futures in Singapore declined -1.85% on Tuesday and are a further -0.63% weaker this morning at US$114.15 while copper advanced 3.39% overnight. Gold is 0.93% higher at US$2,358 an oz, silver advanced 1.48% to US$28.62 while Bitcoin is -2.4% lower at US$61,575.
Economic Calendar
Australian Wage Price Index (YoY Q1) 11:30
Eurozone GDP (QoQ Q1) 19:00
US Inflation (YoY Apr) 22:30
US Retail Sales (MoM Apr) 22:30
This article was written by James Woods, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
