FTSE 100 today: London markets brace for cautious trading ahead of US inflation and election

Moving markets today: Asia mixed despite Wall Street’s gain; Nvidia and FedEx surge, Australian inflation up; focus on US new home sales and German consumer confidence 

US stocks rebounded on Tuesday, snapping a three-day losing streak, largely driven by a strong comeback in Big Tech stocks. In Asia, markets opened with uncertainty on Wednesday, bracing for an important US inflation report. The yen remained near the 160 per dollar mark, prompting cautious anticipation among traders for potential intervention by Japanese authorities. Oil prices fell after reports from an industry group showed a surprising increase in US crude inventories, raising concerns about softer demand in the world’s largest oil consumer. Gold prices held steady, influenced by a firm US dollar and stable Treasury yields ahead of a key inflation report later in the week. This report is crucial as it could provide clarity on the Federal Reserve’s future interest rate decisions. Investors are particularly focused on Friday’s release of the US Personal Consumption Expenditures (PCE) Price Index, which is closely watched by the Fed for inflation trends. Economists expect the index to show a slowdown in annual growth to 2.6 per cent for May. In the UK, no major economic reports are scheduled, but Friday’s GDP release could impact Bank of England (BoE) policymakers’ considerations for a potential interest rate cut in August. With parliamentary elections scheduled for July 4, investors are exercising caution, anticipating the BoE to withhold meeting minutes until after the election. The FTSE 100 closed lower on Tuesday, and futures suggest a subdued start for Wednesday’s trading session. Here are five key takeaways for your day. 

Australian inflation hits 4 per cent in May, raises August rate hike odds

Australia’s consumer price index (CPI) surged to 4 per cent in May, accelerating from a 3.6 per cent increase in April. This rise poses challenges for the Reserve Bank of Australia (RBA) in its decision-making on potential interest rate cuts.  

The CPI exceeded the expected 3.8 per cent forecast from economists, driven primarily by higher costs in housing and transportation, according to data from the Australian Bureau of Statistics. Despite a monthly decline in fuel prices, the year-on-year comparison showed a significant increase of 9.3 per cent, up from 7.4 per cent in April.  

Last week, the RBA opted to maintain its benchmark interest rate at 4.35 per cent, but it has signalled caution regarding the possibility of future tightening measures. Market odds of an RBA quarter-point hike in August jumped to 30 per cent, up from 12 per cent before the data. 

FedEx stock jumps after upbeat forecast and $2.5 billion buyback plan

FedEx shares surged in after-hours trading after the company gave an optimistic forecast and announced $2.5 billion in share buybacks for the current fiscal year.  

As a key indicator of global economic trends, FedEx predicted low-to-mid single-digit revenue growth and projected earnings per share between $18.25 and $20.25, slightly above analysts’ expectations of 3 per cent revenue growth and $20.15 per share earnings.  

For its fourth quarter, FedEx reported a net income of $1.47 billion on $22.1 billion in revenue. The company also plans $2.5 billion in stock repurchases for fiscal 2025. Following these announcements, FedEx shares climbed 15 per cent on Tuesday evening. 

Rivian shares skyrocket on Volkswagen’s $5 billion investment plan

Rivian’s stock skyrocketed more than 35 per cent after Volkswagen revealed plans to invest up to $5 billion in a software partnership. This move is part of VW’s strategy to strengthen its electric vehicle offerings against competitors like Tesla and Chinese automakers, the FT reported. 

VW’s internal software unit, Cariad, has been struggling with timely product rollouts. The 50/50 joint venture will give VW instant access to Rivian’s EV software for use in its own cars. 

What’s coming up

Investors are keeping a close eye on the US housing market, with the Department of Commerce set to report that new home sales were mostly unchanged in May, holding steady at 640,000. Later in the day, the US Treasury will auction off five-year bonds. Over in Germany, GfK will release its July survey results on consumer confidence. 

The UK has no major economic updates scheduled, but Friday’s GDP report could strengthen the Bank of England’s case for an interest rate cut in August.  

The upcoming parliamentary elections on July 4 are contributing to a cautious market atmosphere, and investors expect the BoE to delay releasing meeting minutes until after the elections. 

Another critical focus for investors is Friday’s US personal consumption expenditures (PCE) price index report, which is anticipated to show a decrease in inflation pressures, aligning with the Fed’s preferred inflation measure.  

This week will also see the release of data on durable goods orders, weekly jobless claims, final first-quarter GDP figures, and the annual reconstitution of the Russell index. 

On Thursday, President Joe Biden and Republican contender Donald Trump will debate in Atlanta, a significant event that could influence the tight race for the upcoming November election, according to recent polls. 

Asian shares mixed as investors await crucial US PCE inflation data

Overnight, the Dow Jones Industrial Average dropped by 0.76 per cent to 39,112.16, while the S&P 500 and Nasdaq Composite showed gains, rising 0.39 per cent to 5,469.30 and 1.26 per cent to 17,717.65, respectively.  

Nvidia, an AI chip company, saw a significant increase of 6.8 per cent, bouncing back after three days of declines, contributing to the broader chip sector’s strong performance, with the Philadelphia Semiconductor index climbing 1.8 per cent. 

Chips played a major role in helping the S&P 500 technology index recover from a three-day slump. Alphabet and Meta Platforms also boosted the communication services index, with gains of 2.7 per cent and 2.3 per cent, respectively. 

In early Asian trading, S&P 500 futures rose 0.31 per cent and Nasdaq futures edged up 0.14 per cent. Over in Europe, EURO STOXX 50 futures increased by 0.14 per cent. The FTSE 100 ended Tuesday down 0.4 per cent, but futures indicated a flat start for Wednesday, with a slight rise of 0.08 per cent to 8,295.5 points. 

In Asia, Japan’s Nikkei N225 and Taiwan’s TWII surged, led by chipmakers, following the tech rally in the Nasdaq. Conversely, Chinese stocks fell, with the blue-chip CSI300 Index and the Shanghai Composite Index both down 0.2 per cent, heading for a 4 per cent decline for the month. Hong Kong’s Hang Seng index also dipped by 0.16 per cent. 

In the commodities market, oil prices were steady in Asian trading, with Brent crude futures at $85.02 per barrel and US West Texas Intermediate crude futures at $80.9 per barrel. Gold prices eased to $2,318 per ounce but remain up 12 per cent for the year, having hit a record high of $2,449.89 last month.