Stock futures in the U.S. are pointing to a higher opening on Wednesday, continuing the positive momentum from Tuesday. The market is reacting to a new government report showing inflation rose slightly less than expected in May.
According to the U.S. Labor Department, consumer prices went up just 0.1% last month, compared to a 0.2% increase in April. Economists had predicted a 0.2% rise again. On a yearly basis, prices increased by 2.4%, which is a little more than in April (2.3%) but still less than the 2.5% experts expected.
When excluding food and energy (which can be very volatile), prices also rose 0.1% in May. The yearly increase in core inflation stayed the same at 2.8%, again lower than the 2.9% forecast.
Trade Deal Progress Supports Markets
Markets were also boosted by news that the U.S. and China have agreed on a basic framework to ease trade tensions after talks in London. U.S. Commerce Secretary Howard Lutnick said both sides agreed to relax some export restrictions, but the deal still needs approval from President Joe Biden and China’s President Xi Jinping.
Former President Donald Trump commented on Truth Social that China would supply key materials like rare earth metals and that the U.S. would keep 55% tariffs while China would get 10%. He said the relationship is “excellent.”
Tuesday Market Recap
On Tuesday, U.S. stocks ended slightly higher as investors watched for news from the trade talks. The Dow rose 105 points to close at 42,866.87, the Nasdaq gained 123.75 points to finish at 19,714.99, and the S&P 500 increased by 32.93 points to end at 6,038.81.
Small Business Optimism Improves
A report from the National Federation of Independent Business showed that small business confidence rose to 98.8 in May, the highest in three months, beating expectations of 95.9.
Looking Ahead
Investors are now waiting for more important data, especially on inflation and crude oil supplies. The U.S. Energy Information Administration will report on oil stockpiles later today, and the Treasury will auction $39 billion in 10-year bonds.
Markets Around the World
Europe
European markets were slightly up on Wednesday as investors reacted to positive news from U.S.-China trade talks. Germany’s DAX rose 0.5%, the U.K.’s FTSE 100 gained 0.3%, and France’s CAC 40 added 0.1%.
Some British homebuilding stocks rose before a public spending announcement, but Ibstock fell 14% due to profit margin concerns. Fashion retailer Inditex (owner of Zara) dropped 4.3% after weak quarterly sales. Engineering firm Ricardo jumped 25% after a Canadian company agreed to buy it.
Asia
Asian markets also rose as hopes grew around the U.S.-China trade agreement. However, gains were limited as investors waited for the U.S. inflation data.
China’s main stock index rose 0.5%, helped by auto companies. Hong Kong’s market gained 0.8%, led by electric vehicle and tech stocks.
Japan’s market climbed 0.6% after wholesale inflation slowed, reducing pressure on the central bank to raise interest rates. South Korea’s stock market hit its highest level in over three years after the government announced plans to make the market more attractive. Strong performances from tech firms like SK Hynix and Hyundai Mobis helped push the market up 1.2%.
Australia’s stock market closed slightly higher at a four-month high, while New Zealand’s index rose 0.3%.
Commodities and Currencies
Oil prices are up $1.09 to $66.07 per barrel after falling slightly the previous day. Gold rose $37.90 to $3,381.30 an ounce, bouncing back after Tuesday’s drop.
The U.S. dollar slipped slightly against the Japanese yen, now at 144.51 yen compared to 144.87 yesterday. Against the euro, the dollar weakened slightly to $1.1470 from $1.1425.
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