- US inflation data is expected to indicate a slight cooling of consumer prices in May.
- The Fed will likely maintain interest rates unchanged at its June 13-14 meeting.
- Data revealed that retail sales in the Eurozone remained unchanged in April.
On Tuesday, US equities closed higher as economically sensitive sectors made gains. Investors were anticipating inflation data and the upcoming policy meeting of the Fed next week.
The inflation data is expected to indicate a slight cooling of consumer prices in May compared to the previous month, but core prices are likely to remain high. It is anticipated that the Federal Reserve will maintain interest rates.
Major indexes fluctuated as investors took a break after driving the S&P 500 up nearly 20% from its lows in October 2022. This increase was fueled by gains in mega-cap stocks, a stronger-than-expected earnings season, and optimism that the Fed is nearing the conclusion of its interest rate hike cycle.
Recent economic data and dovish comments from Fed officials have increased the chances of the Fed keeping interest rates unchanged at its June 13-14 meeting.
According to CMEGroup’s Fedwatch tool, Fed fund futures suggest that traders have priced in an approximately 80% probability of the central bank maintaining interest rates in the range of 5% to 5.25%. However, there is a 50% chance of another 25-basis-point rate hike in July.
Apple experienced further losses after unveiling the Vision Pro, an expensive augmented-reality headset that entered a market dominated by Meta.
European equities rose on Tuesday, driven by a surge in the shares of healthcare giant Novo Nordisk. However, concerns about major central banks implementing additional interest rate hikes limited the gains.
Novo Nordisk, a Danish drug developer, saw a significant rise of 4.1% as trading resumed after a holiday in Copenhagen on Monday. The company announced that it had initiated discussions to acquire a controlling stake in medical device designer Biocorp.
On Monday, hawkish statements from European Central Bank President Christine Lagarde and Bundesbank President Joachim Nagel solidified expectations for further rate hikes in June.
Interestingly, while the US money markets are betting on the Federal Reserve refraining from raising rates this month, comments from European officials suggest a different approach.
Meanwhile, data revealed that retail sales in the Eurozone remained unchanged in April, with reduced spending on food and car fuel but increased purchases of other products, particularly online.
