By Geoffrey Smith
Investing.com -- The U.S. releases April data for personal income and spending - and the Fed's preferred measure of inflation, the Personal Consumer Expenditures index. Analysts expect evidence that the annual rate of inflation peaked in March. Global wheat prices edge higher as Europe gets nowhere in persuading Vladimir Putin to allow grain exports from Ukrainian ports. Ethereum slumps on a delay to its big network change. Stocks are set to snap a seven-week losing streak, but Gap shows that the retail sector is still capable of producing at least one horror story a day. And oil prices edge down from their highs ahead of the start of the U.S. summer driving season. Here's what you need to know in financial markets on Friday, 27th May.
1. Annual inflation may have peaked
The U.S. will release personal income and spending data at 8:30 AM ET (1230 GMT), along with figures for personal consumer expenditures, the Federal Reserve’s preferred measure of inflation.
The PCE figures are expected to add to evidence that the annual rate of inflation peaked in March, although this is largely due to the jump in prices last April as passing out of the year-on-year calculations. As such, the more important figures will be the month-on-month rise in the core PCE, which is expected to come in at 0.3%, unchanged from March.
More granular data on spending on Thursday appeared to paint a picture of consumers moving downmarket to save money – Dollar Tree (NASDAQ:DLTR) being one of the biggest beneficiaries of that trend. Bargain-hunting was also in evidence in Costco's (NASDAQ:COST) numbers after the bell, but attention is likely to focus most on Gap (NYSE:GPS), which slumped after reprising the litany of woes heard from other retailers this week.
2. Wheat higher amid deadlock over Ukraine exports
Global wheat prices pushed higher again as Russia rejected claims by the West that it’s responsible for the shortage of grain on world markets.
In a phone call with Italian Prime Minister Mario Draghi, Russian President Vladimir Putin blamed Ukraine for the blockade his navy has put on shipments out of Ukraine’s ports on the Black Sea. He said Russia would be willing to arrange safe passage for them if the West dropped its sanctions.
U.S. Wheat Futures rose 1.0% to $1,154.30 a ton by 6:05 AM ET.
The call took place as Russia nears a technical default on its international debt, now that the U.S. Treasury has closed a loophole that allowed the country to keep servicing its dollar-denominated bonds. On the battlefield, Russia continues to make steady, incremental gains in the Donbas region of eastern Ukraine, according to a daily update from British defense intelligence.
3. Stocks set to snap 7-week losing streak; Workday's earnings put it under pressure
U.S. stock markets are set to snap a seven-week losing streak, on growing confidence that the Federal Reserve will slow or pause its monetary tightening later this year as the economy slows.
Weak data from the housing market and earnings downgrades from the retail sector have both pointed to the froth coming off some of the frothiest areas of the economy this week (although the week’s jobless claims numbers suggested no meaningful uptick in lay-offs yet).
By 6:10 AM ET, Dow futures were up 30 points, or 0.1%, while S&P 500 futures were up 0.2%, and Nasdaq 100 futures were up 0.4%. All three of the main cash indices are on course for gains of over 4% for the week.
In addition to the retailers mentioned, Apple (NASDAQ:AAPL) stock may come in for some attention after newswire reports reheated video footage of a riot by workers at a Chinese factory of one of its suppliers earlier in the month. Quanta Computer (TW:2382) workers in Shanghai, who assemble the MacBook for Apple, had been protesting at being effectively imprisoned at their workplace for nearly two months.
Workday (NASDAQ:WDAY) will also be in focus after missing earnings forecasts late on Thursday and giving disappointing guidance.
4. Ethereum slumps on Merge delay
Stocks may be recovering, but crypto continues to struggle. Ethereum hit its lowest in over a year amid concern at the delay in its network switching to a new way of working that would slash its energy use and reduce transaction fees.
The so-called “Merge,” which will see the network transition from the usual ‘proof-of-work’ mechanism for mining new coins to a system known as ‘proof-of-stake’, isn’t expected to be completed before August, the network’s pioneer Vitalik Buterin said at a conference last week.
Ethereum lost 10% on Thursday and fell as much as 8% on Friday before paring losses to trade at $1,786.68 by 6:15 AM ET. The news also weighed on other ‘alt-coins’, with Cardano losing 13% and Solana losing 22%. Bitcoin, meanwhile, struggled to hold above the $29,000 level.
5. Oil close to highs ahead of Memorial Day weekend
Crude oil prices eased slightly – but only slightly – ahead of a Memorial Day weekend when pent-up demand for travel in the reopened U.S. economy is likely to trump record-high gasoline prices.
Signs that the Biden Administration is rethinking its energy policy increased on Thursday as Bloomberg reported that it is asking the oil industry about the possibility of reopening shuttered refineries to increase domestic supplies and bring prices down before it is too late to stop them having a decisive impact on the mid-term elections in November.
By 6:20 AM ET, U.S. crude futures were down 0.5% at $113.58 a barrel, while Brent crude was down 0.3% at $113.78 a barrel.