U.S. index futures point to a mostly flat opening on Monday, continuing the lackluster performance observed over the last two sessions. Market participants remain cautious, awaiting key events later this week, notably the Federal Reserve's monetary policy meeting.
On Wednesday, the Fed is expected to maintain current interest rates. Given the widely anticipated decision, traders are likely to focus on the central bank's economic projections and rate forecasts. Prior to the Fed's announcement, the Labor Department will release May's consumer price inflation report.
Economists predict a 0.1% rise in consumer prices for May, following a 0.3% increase in April. Core consumer prices, excluding volatile food and energy components, are anticipated to rise by 0.3% for the second consecutive month. The annual growth rate in consumer prices is expected to remain steady at 3.4%, while core inflation is projected to slow to 3.5% from April's 3.6%.
Additional reports this week will cover producer prices, import and export prices, and consumer sentiment and inflation expectations.
Friday's trading session was marked by directionless movement, extending Thursday's flat performance. The major averages fluctuated across the unchanged line before closing slightly lower. The S&P 500, after hitting a new intraday high, closed down 0.1% at 5,346.99. The Dow fell 0.2% to 38,798.99, with the Nasdaq also declining 0.2% to 17,133.13.
For the week, the Nasdaq surged 2.4% and the S&P 500 rose 1.3%. The Dow registered a modest 0.3% gain.
The market's volatility was driven by the Labor Department's monthly jobs report, revealing a significant employment surge in May, coupled with an unexpected rise in the unemployment rate. Non-farm payrolls climbed by 272,000 jobs in May, surpassing expectations of 185,000. The unemployment rate increased to 4.0% from April's 3.9%, the highest since January 2022.
Bill Adams, Chief Economist at Comerica Bank, described the May jobs report as a "Rorschach blot." Optimists see it as evidence of ongoing economic expansion, while pessimists focus on the rising unemployment rate, increased part-time employment, and the decline in temporary employment—considered a precursor to broader job market weakness.
Adams noted the report presents mixed signals for the interest rate outlook. Accelerating wage growth suggests potential inflationary pressures if the Fed eases, while higher unemployment hints at weaker future wage growth, reduced consumer demand, and diminishing business pricing power, which could curb inflation.
Most sectors showed modest moves, though gold stocks plummeted, leading the NYSE Arca Gold Bugs Index down by 6.6%, driven by a sharp drop in gold prices. Steel stocks also suffered, with the NYSE Arca Steel Index falling 1.9% to a six-month low. Interest rate-sensitive telecom stocks declined, as reflected by a 1.8% drop in the NYSE Arca North American Telecom Index. Networking, housing, and airline stocks also weakened, whereas pharmaceutical and banking stocks exhibited slight strength.
**Commodity and Currency Markets**Crude oil futures have risen by $0.81 to $76.34 per barrel, recovering from a minor dip of $0.02 to $75.53 a barrel last Friday. In parallel, gold futures have slightly declined by $0.60 to $2,324.40 per ounce, following a significant drop of $65.90 to $2,325 per ounce in the previous session.
On the currency front, the U.S. dollar is currently trading at 156.99 yen, up from 156.75 yen at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.0751, slightly down from last Friday's $1.0801.
**Asia**
Asian markets had a mixed performance on Monday, with exchanges in China, Hong Kong, and Australia closed for public holidays.
The U.S. dollar appreciated in international markets as the euro weakened markedly amid political turmoil in France following President Emmanuel Macron's call for early legislative elections.
Gold traded below $2,300 per ounce ahead of the Federal Reserve's meeting this week, which is not expected to result in any changes to monetary policy. Oil prices increased on hopes of better demand for fuel during the U.S. summer.
In Japan, markets surged significantly after data showed the country's economy contracted less than initially estimated for the January-March period, thanks to upgraded capital expenditure figures.
The Nikkei 225 Index climbed by 0.9% to 39,038.16, while the broader Topix Index increased by 1% to 2,782.49. A weaker yen boosted export-related stocks, with Honda Motor and Toyota Motor rising by 2.4% and 1.7%, respectively.
Financial stocks were buoyed by higher domestic yields, with Mitsubishi UFJ Financial and Sumitomo Mitsui Financial both advancing around 2%.
Electronics giant Sharp saw a substantial rise of 6.3% following SoftBank Group's announcement of a new AI data center. SoftBank's shares themselves grew by 2.4%.
This week, the Bank of Japan (BOJ) is holding a two-day monetary policy meeting, where it may deliberate on scaling back its approximately 6 trillion yen ($38 billion) in monthly Japanese Government Bond purchases.
In contrast, South Korean markets fell notably as investors awaited signals from the upcoming Federal Reserve meeting. The Kospi declined by 0.8% to 2,701.17, with market heavyweight Samsung Electronics dropping 2.1% and leading chemicals manufacturer LG Chem falling 3%.
New Zealand's benchmark S&P/NZX-50 Index fell by 0.6% to 11,787.57, marking its third consecutive decline.
**Europe**
European stocks fell on Monday, with French stocks experiencing heavy selling pressure after President Emmanuel Macron's call for snap legislative elections in June.
Macron's decision followed the European Union elections, which indicated a shift towards right-wing and far-right parties.
Investors are also focusing on the Federal Reserve policymakers' upcoming update to their rate forecast on Wednesday, although no change in policy rates is expected.
The French CAC 40 Index dropped by 1.6%, the German DAX Index fell by 0.5%, and the U.K.'s FTSE 100 Index declined by 0.2%.
French banks led the losses, with significant declines in shares of BNP Paribas, Credit Agricole, and Societe Generale.
Airbus SE shares also fell after the company announced that its Airbus Defence and Space unit had received a contract from Al Yah Satellite Communications Co. PJSC (Yahsat) for two new geostationary telecommunications satellites, Al Yah 4 and Al Yah 5.
Pennon Group saw a drop as the British water company appointed David Sproul as chair designate, succeeding Gill Rider post the annual general meeting on July 24.
Conversely, Tristel's shares rose following the announcement of Matthew Sassone as its new Chief Executive Officer, effective September 2.
In economic news, a report by S&P Global showed that U.K. permanent staff appointments fell for the twentieth consecutive month in May. However, the pace of decline was the mildest since March 2023. Recruitment consultants attributed this to delayed decision-making and a lack of demand among companies, according to the KPMG/REC Report on Jobs. Temp billings also saw a decrease in May, but the decline was the weakest since January.
**U.S. Economic Reports**
The U.S. Treasury Department is set to announce the results of this month's auction of $58 billion worth of three-year notes at 1 pm ET.
