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Credit Suisse Sees Upside Risk to Inflation in Next 6-12 Months

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U.S. inflation data due, decision day at the Bank of England, and Trump meets freed hostages ahead of North Korea summit. Here are some of the things people in markets are talking about today.

Inflation

Headline consumer prices are forecast to show a rise of 2.5 percent in April from a year earlier when the data is published at 8.30 a.m. Eastern Time. With some Fed policymakers already expressing a lack of concern about a short-term overshoot on the inflation level, a move further away from the bank’s 2 percent target is unlikely to ruffle too many feathers as long as the recent rise in oil prices doesn’t feed into sharper moves higher in the price level. 

Bank of England 

Today’s Bank of England decision is expected to show no change in rates following a raft of weaker-than-forecast economic data for the first quarter of the year. Traders will be looking for any change from the previous 7-2 vote in favor of a hold when the decision is announced at 7 a.m. Today’s announcement will be accompanied by an updated inflation report and will be followed by a press conference with Bank of England Governor Mark Carney at 7:30 a.m., which investors will watch closely to see if a 2018 rate rise remains on the table. 

Free

President Donald Trump personally welcomed home the three American hostages released from North Korea when they arrived in Washington with Secretary of State Mike Pompeo. The president is said to be leaning towards Singapore as the location for his upcoming summit with Kim Jong Un. While Trump’s North Korea strategy seems to be bearing fruit, his Iran moves are inflaming tensions in that region, with Israel’s striking of targets in Syria pushing oil to $71.54 a barrel by 5:40 a.m. this morning. 

Markets rise 

Overnight, the MSCI Asia Pacific Index added 0.4 percent while Japan’s Topix index rose 0.3 percent. In Europe, the Stoxx 600 Index was 0.2 percent lower in a quiet trading session due to holidays in some parts of the region, with shares in BT Group Plc plunging as much as 10 percent after the company announced 13,000 job cuts as part of a cost-reducing plan that failed to impress investors. S&P futures pointed to a slightly higher open, the 10-year Treasury yield was at 2.975 percent and gold was higher.

Election, government?

Mahathir Mohamad is set to become Malaysia’s prime minister after a shock election result which ends the six-decade rule of Najib Razak’s party. Analysts expect the country’s stock index to drop and the ringgit to weaken when markets reopen on Monday. Meanwhile, in Italy, Silvio Berlusconi has dropped his opposition to a coalition between the anti-establishment Five Star Movement and the anti-immigrant League. Both parties meet today to try to agree a program for government which, if successful, would avoid another election. 

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