Wall Street stocks rose on Wednesday as inflation across America slowed in May. On an annual basis, US CPI inflation slowed to 3.3%, down from 3.4% in the year to April.
Consumer prices were flat, month-on-month, having risen by 0.3% during April. Cheaper gasoline at the pumps helped to ease the cost of living squeeze, while housing costs continued to rise.
The FTSE 100 (^FTSE) and European stocks were also higher on the day despite wet weather affecting UK economic growth in April.
According to the Office for National Statistics (ONS), persistent rain kept consumers from spending and caused growth to flatline during the month. Rainfall in April was 55% higher than average and the wettest April since 2012, with sectors such as retail, construction and pubs all severely impacted.
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Gross domestic product (GDP) was forecasted to have grown by 0.6%, following growth of 0.4% in March. It comes as a blow to prime minister Rishi Sunak, who previously claimed that the British economy had turned a corner.
London’s benchmark index was 0.8% higher in afternoon trade.
Germany's DAX (^GDAXI) rose 1.4% and the CAC (^FCHI) in Paris headed 1% into the green.
The pan-European STOXX 600 (^STOXX) was up 1.1%.
Wall Street opened higher amid boosted hopes for interest rate cuts later this year. Markets now fully price a November rate cut.
The pound surged against the US dollar (GBPUSD=X), up 0.7% at 1.2840.
How to invest in the Indian stock market.
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Kyle Chapman, FX markets analyst at Ballinger Group comments: "The Fed will breathe a heavy sigh of relief that we are finally beginning to see some progress on the disinflationary trajectory this year.
"The good news is that it is broad-based, and there is good progress on some of the components that were stickier last time around. Shelter inflation refuses to budge, but when the decline in the leading indicators finally filters through, rate cuts should come into clear view."
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Blog close and recap
Well that's all from us for today — thanks for following along as always. Be sure to join us tomorrow when we will be be for more.
Here's a quick recap of some of the top stories from today:
US inflation falls in May
US dollar slides after inflation report
UK economy flatlines in April as bad weather hits spending
EU to raise tariffs on electric cars from China
Oil climbs higher
Fedex to axe up to 2,000 jobs across Europe
Starling Bank hails third annual profit
LaToya Harding
Labour government could be good for stock market
A labour government could be good for the FTSE 100, the managing director at eToro UK said.
Dan Moczulski, managing director at eToro UK, said:
The FTSE seems very comfortable with Labour. We’re seeing a clear parallel to 1997, a moderate Labour party unseating a long-standing and divided Conservative government.
A change of government after years of Tory rule was a stimulant for the UK stock market in 1997 and it looks like it will be again this year.
It comes as the stock market rallied 17% ahead of the 1997 general election, and after Tony Blair had been elected by a landslide it rose 35% in the following year.
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Oracle is top S&P 500 riser, up 11%
Software giant Oracle (ORCL) is the top riser on the S&P 500 in early trading across the pond.
Shares are up 11% after it announced cloud deals with Google and OpenAI last night, which cheered traders despite fourth-quarter results that missed Wall Street expectations.
"In Q4 alone, Oracle signed over 30 AI sales contracts totalling more than $12.5bn (£9.8bn), including one with OpenAi to train ChatGPT in Oracle Cloud," CEO Safra Catz said.
The company also said that it would bring its database to Google's cloud, with availability coming in November. Organisations will be able to deploy workloads in Google and Oracle cloud data centre regions without being subject to data-transfer charges.
"In Q3 and Q4, Oracle signed the largest sales contracts in our history, driven by enormous demand for training AI large language models in Oracle Cloud," Catz added.
Despite this, fourth-quarter results in Larry Ellison's company fell short of Wall Street expectations.
Total revenue grew 3% to $14.29bn. Net income came in at $3.14bn, or $1.11 per share, down from $3.32bn or $1.19 per share in the year-ago quarter.
In the latest quarter, the company raked in $10.23bn in revenue from cloud services and license support, up 9% from a year before.
Oracle reported total revenue growth of 6% for fiscal 2024. For FY25, analysts expect 9% growth.
The company expects first-quarter revenue to grow between 5% and 7%, while analysts estimate a 7.6% rise.
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How to invest in the Indian stock market
The volatility India's stock market saw this past week showed just how notoriously bad financial markets are at assessing and pricing political risk accurately. But as shares in Mumbai and Delhi bounce back, is it time for you to invest in the world's fifth-largest economy?
You wouldn’t be alone. Last year alone, overseas investors bought $21.7bn worth of Indian stocks, accounting for 55% of foreign purchases of equities in Asia, excluding Japan, according to data from HSBC (HSBA.L).
The benchmark BSE Sensex Index (^BSESN) is up 4% so far this year and the Nifty 50 (^NSEI) has pushed 13% higher in the past six months.
India is already the world’s most expensive major equity market, with a forward price-to-earnings ratio that is even higher than the technology-heavy US market.
“At the simplest level, India is both a low-cost manufacturing location and a rapidly developing source of demand. Perhaps, more significantly, India is also home to true centres of innovation in a number of fields,” said analysts at investment bank Bernstein.
However, with the result of India’s extended election triggering significant market volatility, whether its stock market will continue to outperform is a question on investors’ minds.
Read the full article here
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Fedex to axe up to 2,000 jobs across Europe
Fedex is planning to cut between 1,700 and 2,000 back-office jobs across Europe.
The parcel delivery firm said the cuts will be carried over an 18-month period as it struggles with weak freight demand.
It added that it was expecting a pre-tax cost of $250m to $375m related to legal fees and severance benefits.
FedEx expects the job cuts to help save between $125m and $175m on an annualized basis beginning in fiscal 2027.
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US dollar slides after inflation report
The US dollar has fallen against a basket of other currencies today on the back of May’s inflation report which has bolstered hopes of interest rates cuts.
The Fed is setting rates at 7pm this evening but policymakers are not expected to ease until towards the end of the year.
The dollar’s weakness has meant that the pound is trading at a three-month high of $1.2857, up more than 0.9%, more than a cent higher.
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US inflation breakdown
Here's a breakdown of those US inflation figures:
CPI +0%
Core +0.2%
Food +0.1%
️Energy -2.0%
Core gds 0%
New cars -0.5%
Used cars +0.6%
Apparel -0.3%
Core svc +0.2%
Shelter +0.4%
Rent +0.4%
OER +0.4%
Hotel -0.2%
Med +0.3%
Air -3.6%
Car insur -0.1%
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US inflation falls in May
US inflation has slowed to 3.3% in the year to May, having risen by 0.3% during April. This is down from 3.4% in the year to April.
Cheaper gasoline at the pumps helped to ease the cost of living squeeze, while housing costs continued to rise.
Today’s US inflation report said:
"More than offsetting a decline in gasoline, the index for shelter rose in May, up 0.4 percent for the fourth consecutive month. The index for food increased 0.1 percent in May.
"The food away from home index rose 0.4 percent over the month, while the food at home index was unchanged.
"The energy index fell 2.0 percent over the month, led by a 3.6-percent decrease in the gasoline index."
Core inflation, which strips out food and energy, rose 0.2% in May alone, and was 3.4% over the last year – also lower than in April.
US CPI - misses the expectation on both core and headline
headline 3.3% v/s 3.4% expected
core 3.4% v/s 3.5% expectedCore CPI releases since Jan 2021: pic.twitter.com/SElXZVPNOp
— James Stanley (@JStanleyFX) June 12, 2024
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Paramount shares crash after failed merger talks with Skydance
Shares in Paramount (PARA) have crashed and continue to dive deeper into the red during pre-market hours after the c behind Paramount Pictures pulled the plug on a proposed multibillion-dollar merger, after months of negotiations.
Shari Redstone ended talks with Skydance Media over a merger that would have handed control of Paramount from her family to billionaire David Ellison.
Skydance had offered about $2bn to acquire Redstone's National Amusem*nts (NAI) after which he would merge Paramount into Ellison's company through a stock deal.
Skydance was also ready to buy out about half of Paramount's common shareholders at $15 a share and inject about $1.5bn to help pay off the company's debt.
A statement from National Amusem*nts merely noted that the two sides “have not been able to reach mutually acceptable terms” for the deal.
Paramount has struggled in an evolving media landscape, particularly as its traditional cable business has declined.
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EU to raise tariffs on electric cars from China
The European Union has announced it will increase tariffs on electric cars imported from China as a trader war looms
It will hike the tax on imports from the world’s second-largest economy by as much as 38.1% by 4 July amid concerns that the market is set to be inundated with cheaper imports.
The European Commission (EC) said the tariffs would be 17.4% for BYD, 20% for Geely and 38.1% for SAIC.
Other companies cooperating with the investigation would face a tariff of 21% and non-cooperating companies 38.1%
The move will be applied provisionally from next month in line with World Trade Organisation (WTO) rules, which give China four weeks to challenge any evidence the EU provides to justify the levies on imported EVs.
The EU said in a statement today:
“The provisional findings of the EU anti-subsidy investigation indicate that the entire BEV value chain benefits heavily from unfair subsidies in China, and that the influx of subsidised Chinese imports at artificially low prices therefore presents a threat of clearly foreseeable and imminent injury to EU industry.”
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Wall Street to open higher amid inflation data
All eyes will be on the other side of the Atlantic today as traders brace for a crucial US CPI print, widely expected to show decreasing inflationary pressure on a month-on-month basis.
Pierre Veyret, technical analyst at ActivTrades, said:
“Even if investors don't expect anything major from the FOMC's rate decision, they will cautiously scrutinise Fed Chairman Powell's wording during his press conference to assess the central bank's projection over the next quarters.”
“Monetary policies remain the primary market driver for equity traders, and most investors have tamed their dovish expectations over the past few months.”
“This situation could lead to sharp bullish price action over many benchmarks if today's data were to display a better-than-expected inflationary environment.”
“The STOXX-50 trades higher, close to the 5,000pts mark, with almost all sectors rising and top performers among financial and basic material shares.”
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Gold rush grips Asia
Demand for gold in Asia surged on Wednesday despite prices hovering near the record highs. It comes as buyers are snapping up the metal to hedge against geopolitical and economic uncertainty.
Spot gold is trading a little over $2,300 per ounce, up about 12% year-to-date and only about 6% shy of the record high it hit in May.
Lower confidence in other investment options, such as real estate and equities, is also a factor behind the demand for gold, according to analysts.
"When the macro-economic backdrop returns to normal, when real estate and equities are more interesting, I think that price sensitivity will return," Ruth Crowell, chief executive of the London Bullion Market Association, told Reuters.
In Japan, there are more gold bulls than bears despite record high prices, according to Bruce Ikemizu, chief director of the Japan Bullion Market Association.
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Payments taken twice from some Co-op bank accounts
Customers at the Co-operative Bank have been victim to a glitch which meant payments were taken twice from some small business accounts.
The lender said that "duplicate, historical transactions" had been appearing in some business customers' balances. It apologised for any inconvenience caused and said it was "supporting customers during this period."
According to its website, Co-op bank has about 3.1 million retail customers and 96,000 small business customers.
One person on X, formerly Twitter, complained that they were “almost £5k down thanks to this with no resolution in sight”.
A spokesman for the Co-operative Bank said:
We are aware there are a small number of SME account holders who have duplicated payments showing in their balances and are in the process of correcting this issue. We apologise for any inconvenience caused and are supporting customers during this period.
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Starling Bank hails third annual profit
Starling Bank posted its its third annual profit on Wednesday, boosted by higher interest rates.
The mobile-only bank saw pre-tax profits rise 54.7% to £301.1m in the year to the end of March, while revenue grew 50.6% to £682.2m.
The lender, which has 4.2 million customers added that total deposits were up 4% to £11bn.
However, gross lending slipped to £4.7bn as its role as one of the biggest lenders in the government-backed COVID business recovery program runs down.
LaToya Harding
How to get the best holiday exchange rates
This week the value of the pound hit 1.18 euros (GBPEUR=X) — its highest point since August 2022. For anyone planning a holiday to the Eurozone, it has raised the question of whether now is a good time to get your holiday money.
The pound’s gains against the euro came as the European Central Bank cut interest rates. Lower rates in the eurozone make rates in the UK look comparatively attractive to investors, so money has flowed from the eurozone to the UK, pushing the pound up against the euro.
With the ECB cut largely already reflected in the current exchange rate, if you’re travelling to the eurozone this summer, it might persuade you to exchange at least some of your cash while the pound is riding high.
Of course, there are no guarantees it won’t rise even higher by the time you travel. Forecasting exchange rate movements is notoriously difficult, and they’re affected by all sorts of unpredictable factors, so the pound could rise again. It means you might not want to take a punt on this being the peak, and exchanging all the cash you need on your break.
One possible option is to exchange some of it now, and the rest of it closer to the day you travel, to hedge your bets against a fall in the pound between now and then.
However, it’s important to bear in mind that the best exchange rates for holiday money are available for those who spend on debit and credit cards while they’re away (as long as they’re the ones without additional charges for overseas use).
Read the full article here
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Oil climbs higher
Oil prices climbed higher on Wednesday amid upbeat global demand views from the US Energy Information Administration and OPEC.
It came as US crude oil inventories fell more than expected last week.
Brent crude futures rose 50 cents, or 0.6% this morning, while US West Texas Intermediate (WTI) crude futures gained 62 cents, or 0.8%.
The IEA raised its 2024 world oil demand growth forecast to 1.10 million barrels per day from a previous estimate of 900,000 bpd, while OPEC maintained its 2024 forecast for relatively strong growth in global oil demand, citing expectations for travel and tourism in the second half.
IEA executive director Fatih Birol said:
"As the pandemic rebound loses steam, clean energy transitions advance, and the structure of China’s economy shifts, growth in global oil demand is slowing down and set to reach its peak by 2030.This year, we expect demand to rise by around one million barrels per day.
"This report’s projections, based on the latest data, show a major supply surplus emerging this decade, suggesting that oil companies may want to make sure their business strategies and plans are prepared for the changes taking place."
LaToya Harding
GameStop raises $2.14bn
GameStop (GME) said on Tuesday it had completed an "at-the-market" equity offering of its shares to raise roughly $2.14bn in gross proceeds.
Shares of the video game retailer, which has been at the centre of the meme stock frenzy, rose more 22% yesterday, and is down 5% in pre-market trading.
It comes just days after meme stock influencer Keith Gill's first livestream in three years, which saw more than 600,000 viewers tune in.
GameStop said it sold the maximum amount of 75 million shares registered under the program.
According to Reuters' calculations, the average sales price of each GameStop share came at around $28.50. The company's shares closed at $30.49 after Tuesday's trade.
The company said it intends to use the proceeds for general corporate purposes, which may include acquisitions and investments.
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Legal and General announces company shake up
Legal & General (LGEN.L) slipped 3% in London after it announced a £200m share buyback as it set out plans to restructure the business into three core units and promised to increase shareholder returns.
"The strategy and targets set out today signal L&G's ambition and commitment to invest to grow our business, and reward our shareholders for their support," said new chief executive Antonio Simoes, who took over from Sir Nigel Wilson in January.
The company said it intends to return more to shareholders over 2024 to 2027, with 5% dividend growth in 2024 followed by 2% growth per annum, in addition to further share repurchases.
It also added that a US expansion was on the cards.
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Rentokil rises on Nelson Peltz stake
In equity markets, Rentokil (RTO.L) surged to the top of the FTSE 100 (^FTSE) on reports that activist investor Nelson Peltz's Trian Management has taken a significant stake in the pest control company.
According to sources cited by Bloomberg, the investment firm is now among the top 10 shareholders in Rentokil, which owns Terminix in the US.
The exact size of Trian's stake and its plans for Rentokil have not been disclosed.
Shares soared as much as 16% on the back of the news, reaching the highest level in around three months. This gives the company a market capitalisation of about £12bn ($15.3bn).
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President Macron set to speak today
French president Emmanuel Macron is set to speak at a press conference later today, however there have been growing questions about the political landscape his centrist alliance will be facing at the elections.
On the left, an alliance was formed on Monday night between the Greens, Socialists, Communists and La France Insoumise. But on the right there is still uncertainty, as Éric Ciotti, who leads Les Républicains party, called for an alliance with Marine Le Pen’s Rassemblement National.
Jim Reid at Deutsche Bank said:
Other figures in the party sternly rejected those suggestions, but the historic divisions between the traditional right-wing parties and the RN are becoming increasingly blurred as the latter has come to dominate the right-wing of the political spectrum in France.
Later in the day, we heard that talks on forming an alliance between RN and the smaller far-right Reconquest party had broken down.
In terms of the latest polls, an Ifop survey out yesterday had Marine Le Pen’s party on 35%, an alliance of four left-wing parties on 25%, and Macron’s alliance on 18%.
Watch: How does inflation affect interest rates?
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