A homeless man sleeps under a blanket to shelter from the rain in a building belonging to one of the European institutions, in Brussels, Belgium, April 28, 2023.
Omar Havana | Getty Images News | Getty Images
The report comes from today’s CNBC Daily Open, our new international markets newsletter. The CNBC Daily Open gives investors a quick overview of everything they need to know, no matter where they are. Do you like what you see?you can subscribe here.
what you need to know today
- There are still signs that conditions in the US are slowing. New jobless claims came in at 261,000 in the week ended June 3, beating estimates of 235,000 and the highest weekly rate since Oct. 30, 2021. The data reinforced May’s employment report, which showed the unemployment rate rose 0.3 percentage point to 3.7%.
- Still, investors remain optimistic. All three major U.S. stock indexes were higher on Thursday, with the S&P 500 notching its highest closing level of the year. But European markets were mixed and tepid. The pan-European Stoxx 600 index ended flat.
- Professional Edition Shares of GameStop fell 17.9 percent after the company fired its chief executive and named Ryan Cohen, dubbed the “king of memes” in online retail trading, as executive chairman. Here’s what analysts had to say about the sudden move.
the bottom line
Everyone hates when companies raise prices while reducing the size of a product—a phenomenon called “shrinking.” Even more frightening is the deflationary inflation that is happening in the economy.
The euro zone entered a technical recession – defined as two quarters of negative economic growth – in the first quarter of this year.Meanwhile, inflation in the euro area remains high, with annual headline inflation at It was 6.1% in May. To be sure, this was below expectations, down from April’s 7% reading. But ECB President Christine Lagarde said it was still “too high” and “will remain there for too long”. In other words: More rate hikes — and more economic pain — are coming.
This trend is spreading all over the world. Central banks in Canada and Australia raised interest rates this week, shocking economists who expected the banks to keep rates on hold as they had done so at previous meetings.Notably, for Australia, the hike comes as the country reports slower economic growth export decline. But as inflation soared in April Beat expectations by 6.8%, the central bank appears to have to slow the economy further. Indeed, RBA Governor Philip Lowe admitted that the economic outlook “will be painful for some time”.
I use these examples to illustrate the importance of next week’s US CPI report to the Fed. Investors are betting on a 72% chance the Fed will keep rates on hold at its next meeting CME FedWatch ToolEven so, it doesn’t mean the US central bank’s rate-hike cycle is over, especially with inflation data hotter than expected.
Yesterday’s market rally is certainly welcome, but investors should also be wary of the impact of contractionary inflation on the US economy.