FTSE 100 today: London markets to trade cautiously ahead of US PCE inflation

Moving markets today: Asian stocks gain ahead of inflation data; yen weakens past 161/$, oil rises, gold nears quarterly high; All eyes are on UK Q1 GDP and US PCE inflation data 

US stocks ended the day largely unchanged on Thursday as investors awaited fresh inflation data. Meanwhile, in Asia, stocks were poised to extend their winning streak for the fifth consecutive month on Friday. This optimism stemmed from the belief that lower inflation in the United States might prompt the Federal Reserve to ease interest rates later in the year. The dollar continued to strengthen, nearing a nearly four-decade high against the yen in Asian trading sessions ahead of key US inflation figures. Oil prices saw slight gains due to increasing supply concerns. Gold prices, though slightly down, were set for their third straight quarterly increase. Investors were particularly focused on upcoming US inflation data, which could provide insights into the Federal Reserve’s stance on potential interest rate cuts. In Japan, inflation accelerated in Tokyo, keeping alive expectations that the Bank of Japan might consider raising rates. The IMF has urged the US to address its fiscal challenges promptly. Nike saw a significant drop in its shares after revising its sales forecast downward. Investors also kept an eye on US personal consumption expenditure (PCE) data scheduled for release on Friday, which could influence the Federal Reserve’s decisions on interest rates this year. Additionally, upcoming UK GDP figures might influence the Bank of England’s confidence in lowering rates in August. The FTSE 100 closed lower on Thursday, and early futures suggested a positive start for Friday’s trading session. Here are five key takeaways for your day. 

Tokyo inflation speeds up, bolstering BOJ rate hike prospects

Japan saw an acceleration in core inflation in June, driven by higher fuel costs and increased import prices due to a weaker yen, according to data released on Friday. This has raised expectations for a potential interest rate hike by the country’s central bank.  

The core consumer price index (CPI) in Tokyo, considered a leading indicator for national inflation trends, climbed 2.1 per cent year-on-year in June, up from a 1.9 per cent increase the previous month and surpassing market expectations of a 2.0 per cent rise.  

Another key index, excluding volatile items like fresh food and fuel, also showed a rise of 1.8 per cent in June, compared to a 1.7 per cent increase in May, closely monitored by the Bank of Japan to assess broader inflation trends. 

IMF calls on us to address fiscal burden promptly

The International Monetary Fund (IMF) has called on the United States to urgently address its growing fiscal challenges, emphasising the need for lawmakers to raise taxes to cover the mounting deficit. In its annual assessment of the US economy, the IMF projected that the country’s debt-to-GDP ratio could reach 140 per cent by 2032, surpassing previous records due to expected continued fiscal deficits in the years ahead.  

The IMF recommended careful consideration of various tax increases, including proposals affecting individuals earning less than $400,000 annually. President Joe Biden has indicated that he does not intend to raise taxes on this income group should he win a second term in the White House, the FT reported. 

Nike stock falls over 10 per cent after cutting sales forecast

Nike’s shares took a hit in extended trading after the company lowered its financial outlook. On a conference call, Nike forecasted a 10 per cent revenue decline for the current quarter and a mid-single-digit drop for the fiscal year.  

Last quarter, revenue missed expectations slightly due to an 18 per cent drop in Converse sales, but earnings of 99 cents per share beat analysts’ predictions by nearly 20 per cent. Compared to last year, sales fell 1.7 per cent, while profits jumped 48 per cent. This led to a more than 10 per cent drop in Nike’s shares during after-hours trading on Thursday. 

What’s coming up

Investors are closely monitoring the US PCE price index report set for Friday, which is expected to indicate a decrease in inflation, aligning with the Fed’s preferred measure. They are also paying attention to preliminary consumer price data for June from France, Italy, and Spain.  

In the UK, the Q1 GDP report coming out on Friday might strengthen the Bank of England’s argument for a potential interest rate cut in August. Additionally, the upcoming parliamentary elections on July 4th have created caution among investors due to the potential market impacts of political uncertainty. 

Asian markets poised for five-month rally; yen weakens past 161/$

Overnight, the S&P 500 edged up 0.091 per cent to 5,482.87 points, and the Nasdaq Composite climbed 0.30 per cent to 17,858.68 points. The Dow Jones Industrial Average also saw a slight rise, increasing 0.093 per cent to 39,164.06 points.  

Major tech stocks like Alphabet and Meta Platforms gained strength as US Treasury yields fell, and Amazon.com surged after hitting a $2 trillion market value for the first time on Wednesday. 

Both S&P 500 and Nasdaq futures moved higher, gaining 0.18 per cent and 0.3 per cent, respectively. In Europe, EURO STOXX 50 futures rose 0.12 per cent. While the FTSE 100 ended the day down 0.6 per cent on Thursday, futures indicated a positive start for Friday, rising 0.23 per cent to 8,239.0 points. 

In Asia, Japan’s Nikkei N225 jumped over 1 per cent, recovering some of its previous losses and looking at a 3 per cent monthly gain, boosted by a weak yen and a tech rally. The Topix index rose 0.80 per cent to 2,815.98. South Korea’s KOSPI stayed nearly flat, inching up 0.08 per cent to 2,786.50, and Australia’s S&P/ASX 200 increased 0.76 per cent to 7,818.30. 

The Japanese yen fell to a new 38-year low, crossing 161 against the US dollar. 

In the commodities market, gold dropped 0.14 per cent to $2,324.12 per ounce. Brent crude oil futures rose 0.24 per cent to $86.60 per barrel, while US West Texas Intermediate crude futures went up 0.29 per cent to $81.97 per barrel.