WORLDWIDE: HEADLINES
Reopening U.S. economy heat up inflation; labor market recovery gaining traction
U.S. consumer prices rose solidly in May, leading to the biggest annual increase in nearly 13 years as a reopening economy boosted demand for travel-related services, while a global semiconductor shortage drove up prices for used motor vehicles.
The pandemic’s easing grip on the economy was also underscored by other data from the Labor Department on Thursday showing the number of Americans filing new claims for unemployment benefits fell last week to the lowest level in nearly 15 months.
Vaccinations against COVID-19, trillions of dollars from the government and record-low interest rates are whipping up demand, leaving companies scrambling for raw materials and labor. Used cars and trucks accounted for about one-third of the rise in consumer inflation last month, reflecting a global semiconductor shortage, which is undercutting auto production.
May’s inflation drivers appear to be temporary, fitting in with Federal Reserve Chair Jerome Powell’s repeated assertion that higher inflation will be transitory.
“Parts of the economy contributing the most to inflation in April and May are going through understandable short-term adjustments or merely reflating back to ‘normal’ levels,” said Chris Low, chief economist at FHN Financial in New York. “Areas not impacted by the pandemic are moderating the CPI rise. But this report confirms demand is exceeding supply.”
The consumer price index increased 0.6% last month after surging 0.8% in April, which was the largest gain since June 2009. Food prices rose 0.4%, but gasoline declined for a second straight month. In the 12 months through May, the CPI accelerated 5.0%. That was the biggest year-on-year increase since August 2008 and followed a 4.2% rise in April.
Full coverage: REUTERS
China’s ride-hailing giant Didi sets stage for mega New York float
Didi Chuxing, China’s biggest ride-hailing firm, on Thursday made public the filing for its long-anticipated U.S. stock market listing, setting the stage for what is expected to be the world’s biggest initial public offering this year.
The company – backed by Asia’s largest technology investment firms, SoftBank (9984.T), Alibaba (9988.HK) and Tencent (0700.HK)- did not reveal the size of the offering, but sources familiar with the matter had previously told Reuters that it could raise around $10 billion and seek a valuation of close to $100 billion.
At that valuation, Didi’s listing would be the biggest Chinese share offering in the United States since Alibaba raised $25 billion in 2014.
In its filing on Thursday, Didi revealed slower revenue growth in 2020 due to the impact of the COVID-19 pandemic, which hammered ride-hailing companies including Uber (UBER.N)and Lyft (LYFT.O) as lockdowns were enforced all over the globe.
Revenue of 141.7 billion yuan ($22.17 billion) was down from 154.8 billion yuan a year earlier, while net loss was 10.6 billion yuan, compared with 9.7 billion yuan a year earlier.
However, Didi started 2021 strongly, as businesses reopened in China. Revenue more than doubled to 42.2 billion yuan for the three months ended March 31 from 20.5 billion yuan a year earlier.
Full coverage: REUTERS
WORLDWIDE: FINANCE / MARKETS
Dollar marooned as investors shrug off inflation spike
After a week of anxious waiting, markets got the high U.S. inflation number they dreaded, shrugged it off and moved on – leaving the U.S. dollar under pressure and most majors stuck in ranges.
Early in the Asia session the greenback nursed small losses, as traders figured there were enough one-offs in last month’s 0.6% rise in consumer prices to support the Federal Reserve’s insistence that inflation was likely to be transitory.
The dollar bought 109.37 yen and was headed for a small weekly loss. It was also on track for modest weekly losses on the Aussie dollar and British pound, last trading at $0.7748 per Aussie and $1.4171 per pound.
A dovish commitment from the European Central Bank to stick with its elevated tempo of bond buying held the euro in check at $1.2175.
“What we’re seeing is a market that believes in the Fed,” said Chris Weston, head of research at broker Pepperstone in Melbourne, as investors temper worries that the strong recovery in the United States prompts early rate hikes.
“We’re going to get tapering,” he said. “But it’s going to get done a such a snail’s pace.”
The data overnight showed U.S. consumer prices up 5% year-on-year, the sharpest rise in more than a dozen years and core inflation surging 0.7% in a month.
But hefty contributions from short-term rises in airline ticket prices and used cars helped convince traders it was not going to drive interest rates higher any time soon.
Full coverage: REUTERS
S&P 500 closes at record high as long-term inflation fears abate
Wall Street stocks ended firmer on Thursday, with the S&P 500 (.SPX) hitting a record closing high, as economic data appeared to support the Federal Reserve’s assertion that the current wave of heightened inflation will be temporary.
All three major U.S. stock indexes advanced, with market-leading megacap stocks putting the Nasdaq (.IXIC) out front. But economically sensitive transports (.DJT) and smallcaps (.RUT) ended the session in negative territory.
The Labor Department’s consumer price index (CPI) data came in above consensus and added fodder to the debate over whether current price spikes could morph into long-term inflation, despite the Fed’s assurances to the contrary.
But a closer look showed that much of the price surge came from items such as commodities and airfares, and is therefore likely to be temporary.
“Earlier this week we had extremely boring market days as we all had our eyes on the bullseye of this CPI report,” said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina. “But once people looked under the surface, the majority of the higher inflation is due to the reopening, and stocks had a relief rally.”
“The market is taking it in stride as it realizes the whole economy isn’t overheating,” Detrick added.
A U.S. House of Representatives committee passed a $547 billion infrastructure spending bill targeting surface transportation, adopting some of President Joe Biden’s proposals as part of his broader $2.3 trillion infrastructure package.
Unofficially, the Dow Jones Industrial Average (.DJI) rose 12.21 points, or 0.04%, to 34,459.35, the S&P 500 (.SPX) gained 19.71 points, or 0.47%, to 4,239.26 and the Nasdaq Composite (.IXIC) added 106.86 points, or 0.77%, to 14,018.61.
Full coverage: REUTERS
Oil trims gains, but heads for third weekly rise on demand recovery
Oil prices slipped on Friday but were set for their third weekly rise on expectations for a recovery in fuel demand in Europe, China and the United States as rising vaccination rates lead to an easing of pandemic curbs.
Brent crude futures fell 23 cents, or 0.3%, to $72.29 a barrel at 0145 GMT, reversing most of Thursday’s climb to its highest close since May 2019.
U.S. West Texas Intermediate (WTI) crude futures slipped 22 cents, or 0.3%, to $70.07 a barrel, after climbing 0.5% on Thursday to its highest close since October 2018.
Brent is set for a gain of 0.5% this week while WTI is set to climb 0.6%.
“If you take the week, we’ve certainly seen prices lift on some demand hopes, but it was mixed,” said Commonwealth Bank commodities analyst Vivek Dhar.
“The U.S. stockpile data didn’t paint a good picture. We saw gasoline and distillate stockpiles really surge. Towards the end of the week that was a dampener on the spirits,” he said.
The U.S. Energy Information Administration reported on Wednesday that gasoline inventories rose by 7 million barrels in the week to June 4, and distillate stockpiles rose by 4.4 million barrels, both much more than analysts had expected.
However, data showing road traffic returning to pre-COVID-19 levels in North America and most of Europe was encouraging, ANZ Research analysts said in a note.
“Even the jet fuel market is showing signs of improvement, with flights in Europe rising 17% over the past two weeks, according to Eurocontrol,” ANZ analysts said.
The Organization of the Petroleum Exporting Countries (OPEC) reinforced the view of healthy demand, sticking to its forecast that demand in 2021 would rise by 5.95 million barrels per day, up 6.6% from a year earlier.
Full coverage: REUTERS
