FX.co ★ Futures Jump Following Tamer-Than-Expected Consumer Price Inflation Data

The major U.S. index futures are currently suggesting a higher open on Wednesday, with stocks likely to build on Tuesday's upward trend.

Initially indicating a flat start, the futures turned positive following the release of a closely watched Labor Department report. The report revealed that consumer prices in the U.S. rose by slightly less than anticipated in April.

Specifically, the Labor Department announced that its Consumer Price Index (CPI) increased by 0.3% in April, following a 0.4% rise in March. Economists had expected a repeat of the 0.4% increase. Excluding the volatile food and energy sectors, core consumer prices also rose by 0.3% in April, matching the 0.4% rise in March and economist projections.

The report further indicated that the annual rate of consumer price growth slowed to 3.4% in April, down from 3.5% in March, aligning with expectations. Similarly, the annual rate of core consumer price growth decelerated to 3.6% from 3.8% in March, matching estimates.

This latest data, following Tuesday's unexpectedly high producer price inflation figures, may enhance renewed optimism regarding interest rate trajectories.

During Tuesday's trading session, stocks fluctuated before ultimately closing mostly higher. The major indices all saw gains, with the Dow recovering after breaking its eight-day winning streak on Monday.

Leading the charge was the tech-heavy Nasdaq, which rose 122.94 points, or 0.8%, to a new record close of 16,511.18. The S&P 500 added 25.26 points, or 0.5%, to finish at 5,246.68, and the Dow gained 126.60 points, or 0.3%, to close at 39,558.11.

The upward momentum on Wall Street came as treasury yields declined after an initial rise, with the yield on the ten-year note falling to its lowest closing level in over a month.

Treasury yields initially increased following another Labor Department report indicating that producer prices rose more than expected in April. Specifically, the Producer Price Index (PPI) for final demand surged by 0.5% in April, following a revised 0.1% decline in March. This surpassed economists' expectations of a 0.3% increase and contrasted with the initially reported 0.2% uptick.

Annually, producer price growth accelerated to 2.2% in April, up from a downwardly revised 1.8% in March, meeting expectations. Although the report initially fueled uncertainty about interest rate prospects, some economists saw the downward revisions to March data as a positive sign.

"In effect, with the revision, the PPI rise was as expected. Proof of that was in the 2.2%, as-expected rise in the year-on-year PPI," noted FHN Financial Chief Economist Chris Low. "Still, it is not all benign, as there is brewing pressure in the core PPI."

Attention was also on Federal Reserve Chair Jerome Powell, who addressed the annual general meeting of the Foreign Bankers' Association. Powell emphasized the need for the central bank to be patient and allow restrictive policies to work, citing a lack of further progress on inflation during the first quarter. While expressing less confidence in achieving the 2% inflation target, he reiterated that a rate hike is not the immediate next move.

Regarding the producer price inflation report, Powell characterized the data as "mixed" rather than "hot," given the downward revisions to March's figures.

The session saw a notable rise in networking stocks, pushing the NYSE Arca Networking Index up by 3.0%, its highest in over a month. Significant strength was also seen in computer hardware and semiconductor stocks, contributing to the Nasdaq's gains. Airline stocks likewise showed substantial strength, as reflected by the NYSE Arca Airline Index's 1.2% rise. Gold, brokerage, and tobacco stocks also performed well.

Commodity and Currency Markets

Crude oil futures inched up by $0.05 to $78.07 a barrel after falling by $1.10 to $78.02 per barrel on Tuesday. Meanwhile, gold is trading at $2,382.50 per ounce, up $22.60 from the previous session's close of $2,359.90. On Tuesday, gold gained $16.90.### Currency Market Overview

The U.S. dollar trades at 155.31 yen, down from 156.42 yen in Tuesday's New York session. Against the euro, the dollar stands at $1.0855, an increase from yesterday’s $1.0819.

### Asian Markets

Asian stocks ended mixed on Wednesday, influenced by market closures in Hong Kong and South Korea for Buddha's birthday. The U.S. dollar and bond yields dipped, while gold prices saw a slight increase following Federal Reserve Chair Jerome Powell's remarks about the unlikely prospect of an immediate interest rate hike to combat inflation.

Producer price data for April exceeded expectations, prompting traders to anticipate key U.S. CPI data for further insights into the Federal Reserve's future actions.

Oil prices edged up on expectations of higher demand after U.S. crude and gasoline inventories declined in the week ending May 10. Conversely, Chinese markets fell significantly due to the Biden administration's announcement of steep tariff increases on a range of Chinese imports. Additionally, the People's Bank of China kept a key policy rate unchanged during the rollover of maturing medium-term lending facility (MLF) loans. The Shanghai Composite Index dropped 0.8% to 3,119.90 despite encouraging news about China's property sector. Reports from Bloomberg indicated that China may propose local governments buy millions of unsold homes.

In Japan, shares ended nearly flat as investors anticipated a potential interest rate hike by the Bank of Japan (BOJ) by July. The Nikkei 225 Index saw a slight rise to 38,385.73 ahead of the domestic GDP estimate for the January-March period, expected on Thursday. The broader Topix Index ended with marginal negative bias at 2,730.88. Chip-linked shares like Advantest and Tokyo Electron surged by 1.9%, while Sony Group shares soared 8.2% after reporting better-than-expected Q4 results and announcing a five-for-one stock split and a share buyback worth 250 billion yen.

Australian markets closed higher following data showing lower-than-expected wage growth in Q1, which lessens the likelihood of another rate hike from the Reserve Bank of Australia. The S&P ASX 200 Index rose 0.4% to 7,753.70, while the All Ordinaries Index gained 0.32% to 8,020.90. Miners led the gains after the federal budget included significant tax credits for the critical minerals industry. Across the Tasman Sea, New Zealand’s S&P NZX-50 Index slid 0.8% to 11,525.88.

### European Markets

European stocks are mostly higher as investors digest mixed earnings reports and the latest U.S. consumer price inflation data. According to Eurostat, the euro area economy grew as estimated in Q1, reversing contractions from the past two quarters. Sequential GDP growth was 0.3%, consistent with preliminary flash estimates, and annual economic growth improved to 0.4% from 0.1%. Additionally, Eurozone industrial production rose by 0.6% month-on-month in March, exceeding expectations.

Germany's DAX Index advanced 0.8%, the U.K.’s FTSE 100 Index increased by 0.4%, and France’s CAC 40 Index rose by 0.2%.

In corporate news, notable movements include:

- Poland’s InPost surged after a 36% jump in its first-quarter core profit.

- British credit data firm Experian rose following forecasts of 6-8% annual organic revenue growth for fiscal year 2025.

- Drinks company Britvic saw a significant increase after posting gains in interim profit and revenue, along with announcing a £75 million share buyback.

- Engineering group Hunting surged on securing a $145 million order from the Kuwait Oil Company.

- Telecom giant Vodafone moved higher after initiating a €500 million share buyback program.

- German conglomerate Merck KGaA saw an uptick despite first-quarter adjusted profit falling less than expected.

- Commerzbank soared after reporting its strongest quarterly profit in over a decade and upgrading its lending income outlook for the year.

Conversely, ABN AMRO Bank shares slumped due to a weaker capital ratio in Q1, attributed to an increase in risk-weighted assets. Finland’s Neste also plunged after lowering its 2024 margin guidance for renewable products.### Thyssenkrupp Shares Decline Amid Forecast Revisions

Thyssenkrupp's shares have experienced a significant decline as the conglomerate has revised its annual sales and profit forecasts downward for the second time in three months.

### U.S. Economic Updates

#### Consumer Price Index Data

An eagerly awaited report from the Labor Department revealed that consumer prices in the U.S. rose at a slightly slower rate than anticipated in April. According to the report, the consumer price index (CPI) increased by 0.3% for the month, following a 0.4% rise in March. Economists had projected a 0.4% increase for April as well.

When excluding volatile food and energy prices, the core CPI also saw a 0.3% rise in April, consistent with the economists' predictions, after experiencing a 0.4% increase in March.

Additionally, the annual growth rate of consumer prices decreased to 3.4% in April from 3.5% in March, aligning with expectations. The core annual consumer price growth similarly decelerated to 3.6% from 3.8% in the previous month, matching estimates.

#### Retail Sales Report

The Commerce Department published a separate report showing that retail sales in the U.S. remained flat in April, defying expectations for a 0.4% increase. This follows a downward revision of March’s retail sales growth to 0.6%.

Excluding motor vehicle and parts dealers, retail sales edged up by 0.2% in April, in line with economists' forecasts, after a 0.9% surge in March.

#### Manufacturing Activity

The Federal Reserve Bank of New York released a report indicating that regional manufacturing activity contracted at a slightly faster rate in May. The general business conditions index dropped to -15.6 from -14.3 in April, with a negative number indicating contraction. Economists had expected a more moderate contraction, forecasting an index of -10.0.

Despite the current contraction, the New York Fed noted that firms remain cautiously optimistic about improved conditions over the next six months.

### Upcoming Reports and Events

- **10:00 AM ET**: The National Association of Home Builders will release its May homebuilder confidence report. The housing market index is expected to remain steady at 51.

- **10:00 AM ET**: The Commerce Department will issue its March business inventories report. Business inventories are projected to decrease by 0.1% after a 0.4% climb in February.

- **10:30 AM ET**: The Energy Information Administration will report on oil inventories for the week ending May 10. Crude oil inventories are expected to decline by 1.4 million barrels, mirroring the previous week's decrease.

#### Fed Appearances

- **12:00 PM ET**: Minneapolis Federal Reserve President Neel Kashkari will participate in a fireside chat discussing the economy.

- **3:20 PM ET**: Federal Reserve Board Governor Michelle Bowman will speak at the DC Blockchain Summit 2024 on "Innovation and the Evolving Financial Landscape."

These upcoming reports and events will provide further insight into the U.S. economic climate and are highly anticipated by market participants.