The consumer-price index jumped 8.6% year-on-year last month, according to the Bureau of Labor Statistics, while economists expected an 8.3% rise. The Consumer Price Index increased 1.0 percent in May on a seasonally adjusted basis after rising 0.3 percent in April. This is ahead of expectations for a 0.7% increase.
The Labor Department said the increase was broad-based, with the indexes for shelter, gasoline, and food being the largest contributors. After declining in April, the energy index gained 3.9 % in May. The food index climbed 1.2% over the period in May as the food at home index increased 1.4 percent.
Core CPI, bar food and energy prices, increased 0.6%, vs a 0.5% increase expected. Core CPI also gained 0.6% in April.
Investors had been eagerly waiting for today's inflation figures, as they could heavily influence the Fed's monetary policy this year. Traders are now pricing in three 50 bp rate hikes for June, July and September, according to a Bloomberg consensus.
Yesterday, the new drop in US stocks erased the ethical gains of the beginning of the week, after the ECB announced that it would start to raise its rates from July. Next week, the US Fed is due to release its rate decision, with a 0.5% hike all but certain. There is also an absolute significance, which goes far beyond the short-termist reaction of financial markets. For example, money is going to cost more because rates are going to rise. No more mortgages at less than 1%, for example. And companies will pay more to finance themselves. And so will governments, because of the rise in bond rates.
The ECB's austerity measures (which also confirmed the end of its asset purchase program on July 1) have led the cost of German debt to rise by 7 points yesterday alone, while Italy's cost of debt jumped by 22 points. Why is this? Because Italian debt is perceived as riskier and economists agree that the ECB has remained very accommodating for a very long time, not unrelated to the large financing needs of the Italian banking system.
In the US, Fed officials, who were hoping for signs that inflation had peaked, will see this latest CPI reading as cause for concern. With supply chains still hampered by bottlenecks caused by the pandemic and the ongoing war in Ukraine, we might still be a very long way off from the central bank's 2 % target.
Economic highlights of the day:
US inflation for May and the University of Michigan's consumer confidence index are today's main indicators.
The dollar fell to EUR 0.9490. The ounce of gold is stable at USD 1842. Oil retreated while remaining high, with North Sea Brent at USD 122.8 per barrel and U.S. light crude WTI at USD 121.50. The yield on 10-year US debt remains firm at 3.05%. Bitcoin remains clinging to USD 29,500.
* Apple, Alphabet - The CMA, the U.K. competition authority, said Friday it is considering an investigation into Apple's and Google's position in the mobile browser market and Apple's restrictions on online gaming through its app store.
* Tesla - The electric car maker canceled three events scheduled this month in China to recruit in human resources management, research and development and supply chain management, it announced Thursday night, without further explanation.
* Netflix is down 3.5% in pre-market trading after Goldman Sachs lowered its recommendation to "sell" from "neutral." The bank justifies its decision by the deterioration of the macroeconomic environment, says it expects a slowdown in the group's growth and has reduced its revenue estimates for fiscal years 2022 and 2023.
* Amazon will not bid for the television rights to India's premier league cricket matches, a deal worth up to 500 billion rupees, or more than 6 billion euros, a source close to the group's plans said.
* Wells Fargo - Federal prosecutors in New York have opened an investigation into suspected criminal hiring practices, the New York Times reported Thursday, days after writing that the bank was conducting fake interviews for positions already filled to comply with diversity regulations.
* Coty announced plans to gradually resume cash distributions to shareholders and consider a $200 million share repurchase plan in 2024.
* KKR - A consortium led by the private equity group announced that its offer for Dutch bicycle maker Accell Group, valued at €1.56 billion, is now unconditional.
* DocuSign - The electronic document signature specialist lost nearly 25% in pre-market trading in reaction to the publication of a quarterly profit below the Refinitiv IBES consensus.
- Amazon.com: Goldman Sachs has maintained his recommendation on the stock with a Buy rating. The target price is reduced from USD 185 to USD 170.
- Countryside: J.P. Morgan upgrades from Underweight to Neutral with a target of GBp 295.
- eBay: Goldman Sachs downgrades to sell from neutral. PT down 10% to $42.
- iHeartMedia: Morgan Stanley cut the recommendation to underweight from equal-weight. PT up 0.3% to $11.
- Lamar: Morgan Stanley downgrades to equal-weight from overweight. PT up 10% to $103.
- Halma: Jefferies remains Underperform with a price target reduced from GBp 2200 to GBp 1960.
- ITM Power: Jefferies remains Buy with target reduced from GBp 600 to GBp 370.
- Meta: Goldman Sachs has maintained his recommendation on the stock with a Buy rating. The target price is decreased from USD 300 to USD 290.
- Netflix: Goldman Sachs downgrades to sell from neutral. PT down 3.5% to $186.
- Pentair: Barclays raised the recommendation to equal-weight from underweight. PT inches up 0.2% to $50.
- Prometheus Biosciences: Piper Sandler starts at overweight with $53 price target.
- Roblox: Goldman Sachs cuts to sell from neutral, price target lowered to $28 from $39.
- Snap-On: MKM Partners initiated coverage with a recommendation of neutral. PT up 8.8% to $238.
- Spirit Airlines: JPMorgan raises to overweight from neutral, price target moves to $30 from $24.
- Standard Motor: MKM Partners initiated coverage with a recommendation of buy. PT jumps 48% to $62.
- Tesla: Barclays adjusts price target to $370 from $325, reiterates underweight rating.
- Workspace: J.P. Morgan resumes tracking at neutral, targeting GBp 870.