U.S. CPI, ECB Meeting, Bitcoin and GameStop - What's Moving Markets

U.S. CPI, ECB Meeting, Bitcoin and GameStop - What's Moving Markets

• By Staff Writer

U.S. CPI, ECB Meeting, Bitcoin and GameStop - What's Moving Markets

1. U.S. CPI looms large

It’s finally here. Investors have largely started on the sidelines this week ahead of the release of the Labor Department's consumer price index report. It’s due for release at 8:30 AM ET (1230 GMT), and will be one of the last major economic indicators before the Fed’s next policy meeting June 15-16.

Consumer prices are rising quickly as the economy reopens after the pandemic, and this CPI report is expected to show prices rose another 0.4% in May, pushing annual inflation above April’s 4.2%, already the highest in more than a decade, to 4.7%.

Investors are studying this number carefully for clues on the Federal Reserve’s monetary policy path, especially after the strong April number and the repeated assurances from central bank policy makers that elevated inflation will be temporary in nature.

A strong number could put Fed members under heavy pressure to defend these views, and many think the average expectation of an annual rise of 4.7% is conservative.

Part of the Fed’s rationale that the price spike will be temporary is the lack of wage growth for years, particularly at the lower end of the pay scale. However, last week’s jobs report showed a larger-than-forecast pickup in average hourly wages for a second straight month, raising the dreaded prospect of a wage-price spiral.

“We are likely in for another inflation shocker in June,” said analysts at Nordea, in a note, “but the question is whether the market will explain it away as a transitory effect.”

The CPI release is not the only important data release, with the number of Americans filing new claims for unemployment profits in the week ending June 5 seen dropping by 15,000 to 370,000 from 385,000 the previous week, also at 8:30 AM ET, in a further sign of economic reopening. 

2. Stocks seen flat; GameStop shakes up C-suite

U.S. stocks are largely unchanged Thursday, continuing the week’s listless trading with investors cautiously awaiting a key U.S. inflation later in the session.

By 6:20 AM ET, Dow Jones futures were up 40 points, or 0.1%, S&P 500 futures were less than 0.1% higher and Nasdaq 100 futures dropped 0.2%.

The three major indices traded within tight ranges lower Wednesday, with the blue-chip Dow Jones Industrial Average, the broad-based S&P 500 and the tech-heavy Nasdaq Composite all ending the day lower but within 0.5% of Tuesday’s closing levels.

Investors have been warily awaiting the latest consumer price release, see above, amid worries that a sharp spike in inflation could prompt the Federal Reserve to curb the pace of its asset purchases or begin to signal an increase to interest rates.

“Although this should be a peak in U.S. prices, inflation should remain elevated and above the target throughout the year,” said analysts at ING, in a note.

In corporate news, meme stock favorite GameStop (NYSE:GME) is likely to be in the spotlight later Thursday after the struggling video game retailer Wednesday announced the appointment of former Amazon (NASDAQ:AMZN) executives Matt Furlong and Mike Recupero as chief executive officer and chief financial officer, respectively, while reporting second-quarter results that topped Wall Street expectations. 

3. ECB policy meeting

The European Central Bank concludes its latest policy-setting meeting later Thursday, and is widely expected to keep its bond-buying at elevated levels, maintaining a generous flow of stimulus to sustain the still nascent recovery.

An announcement is due at 7:45 AM ET (1145 GMT), with the press conference 45 minutes later.

ECB President Christine Lagarde recently stated that it was "far too early" to discuss tapering the bank's 1.85 trillion euro Pandemic Emergency Purchases Programme, suggesting that any discussion over tapering at this meeting would be short. Particularly as it was only at the end of March that the central bank ramped up the bond-buying program to keep borrowing costs in check.

However, a full and frank dialogue is going to have to happen fairly shortly given the backdrop of a resurgent economy fueled by higher vaccination rates and falling infections. Coupled with this, the ECB is likely to raise most if not all its growth and inflation forecasts later today.

“We expect the ECB’s bond purchase volumes to fall clearly already in August, which is customary, since bond issuance volumes normally also fall clearly in that month, said analysts at Nordea, in a note. “The ECB could then decide on lower purchase volumes at the September meeting when the starting point is already lower due to the lower August buying…[and] continue to expect net PEPP purchases to be discontinued by the end of March 2022.”