2022.06.06 – What to expect this week

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This week will be volatile.

U.S. stock futures are higher after losing ground last week following a solid jobs report that suggested the Federal Reserve will continue its aggressive rate hikes to cool the economy and inflation.  

Later this week, investors will get the latest read on inflation when the government releases its Consumer Price Index (CPI) on Friday. The CPI is expected to rise 8.2% in May from a year ago. Excluding food and energy, the core CPI is expected to cool slightly to an annual rate of 5.9% in May from 6.2% the previous month. Money markets are fully pricing in 50-basis point rate hikes by the Fed in June and July to cool inflation.

Last week, the S&P 500 fell 1.2%, while the Dow lost 0.9%, and the Nasdaq shed 1%. On Friday, the Nasdaq tumbled 2.5%, with the Dow and S&P 500 losing over 1% after the Labor Department reported the U.S. economy added 390,000 jobs in May, which was more than expected. The labor market’s strength is likely to keep the Federal Reserve on track to raise interest rates again in June and July. Treasury yields also rose on the news. The 10-year Treasury note now yields 2.96%.

Crude oil prices jumped after Saudi Arabia hiked prices for its crude oil sales in July, signaling tight supply even after OPEC agreed to increase production over the next two months. Light sweet crude is just under $120 per barrel.

Overseas, the British pound rose against the U.S. dollar as Prime Minister Boris Johnson is set to face a vote of confidence in his leadership in the U.K. Parliament. The U.K.’s FTSE 100 rose 1.2% after being closed since Wednesday as the country celebrated a four-day Platinum Jubilee weekend, celebrating Queen Elizabeth II’s 70 years on the throne.

The Stoxx Europe 600 rose 0.9% ahead of the European Central Bank’s policy meeting on Thursday, where it is expected to lay out its plans for unwinding bond purchases and hiking interest rates.

In Asia, markets rallied as China continued to ease COVID-19 restrictions in major cities. The Shanghai Composite rose 1.3% while the Hang Seng Index gained 2.7%.

Cryptocurrency prices are surging, with the price of Bitcoin up nearly 5% to $31,000. The price of Ether is also up nearly 5%, at $1,900.