Investors’ focus today is on the PCE Price Index data. Conditions for inflation growth are forming in Japan

The Eurozone unemployment rate for April unexpectedly fell by 0.1 to a record low of 6.4%, indicating a stronger labor market than expectations of no change at 6.5%. Spain’s May CPI (EU harmonized) rose to 3.8% y/y, exceeding expectations of 3.7% y/y and the largest increase in 13 months. May Eurozone economic confidence rose by 0.4 to 96.0, slightly weaker than expectations of 96.1. Strong Eurozone economic data, along with rising inflationary pressures, may force the ECB to become more hawkish after the first rate cut in June.

WTI crude futures fell to $77.5 a barrel on Friday, declining for the third consecutive session, as uncertainty over demand weighs on oil markets. Revised data on Thursday showed the US economy grew at an annualized rate of 1.3% in the first quarter, down from preliminary estimates of 1.6%. A Federal Reserve official also said she remained concerned about upside risks to inflation and urged caution in policy adjustments, another blow to hopes of lower US interest rates. Meanwhile, EIA data showed that US crude oil inventories fell by 4.2 million barrels last week, compared with expectations of a 1.9 million barrel decline. Investors now await the OPEC+ meeting on Sunday, which is expected to extend supply cuts through 2025.

Asian markets were mostly down on Monday. Japan’s Nikkei 225 (JP225) was down 1.30% for the day, China’s FTSE China A50 (CHA50) lost 0.88%, Hong Kong’s Hang Seng (HK50) decreased by 1.34%, and Australia’s ASX 200 (AU200) was negative 0.49%.

The offshore yuan stabilized at 7.25 per dollar after falling to its lowest level in more than a month in the previous session, reacting to weaker-than-expected Chinese PMI data and recent developments in the US. The latest data showed that China’s manufacturing activity unexpectedly fell to 49.5 in May 2024 from April’s 50.4, falling short of the market’s prognosis of 50.5. The contraction, the first since February, raised concerns about the health of China’s economy and prompted new stimulus measures.

Retail sales in Japan rose by 2.4% year-on-year in April 2024, accelerating after a downwardly revised 1.1% increase in the previous month, which was the lowest in two years. The data exceeded market estimates of 1.9%, marking the 26th consecutive month of retail sales growth. Preliminary data showed that Japan’s industrial production fell by 0.1% month-on-month in April 2024, missing market prognoses for a 0.9% rise and bouncing back from a 4.4% increase, the sharpest increase since June 2022. Japan’s unemployment rate stood at 2.6% in April 2024, unchanged for the third month and in line with market estimates. It is the highest unemployment rate since September last year. The core Consumer Price Index in Tokyo, Japan, rose to 1.9% year-on-year in May 2024, accelerating from a two-year low of 1.6% in April, which aligns with expectations. The Tokyo inflation data is a leading indicator of price developments across the country, as national CPI data will be released in about three weeks.