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Pre-market stocks: Be aware of this in today’s US Inflation Report

It signals to investors that the Federal Reserve may continue to raise interest rates aggressively through the end of the year while trying to bring inflation under control.

“Upcoming inflation data will be most important in determining the pace of gains beyond July,” Citi economists said in a note to clients earlier this week.

The big question for politicians and Wall Street is whether inflation has reached its peak. With the removal of volatile food and fuel costs, annual inflation rose by 6% in May, slightly lower than in April.

“I’m sure inflation will be significantly lower at this time next year and back to something we will feel comfortable with not so long afterwards,”[ads1]; Mark Zandi, chief economist at Moody’s Analytics, wrote in a column for CNN Business.

He pointed to the declining impact of the pandemic, saying that following the EU’s announcement of the oil embargo against Russia, “the worst of the economic downturn from Russia’s aggression is also evident.”

But what is happening in the meantime is still unclear. High fuel and food prices lead to inflation in other parts of the economy. US gas prices are hovering just one cent below $ 5 per gallon, and oil prices could rise even higher this summer, Goldman Sachs said this week.

One factor I have followed closely is housing costs, also known as “shelter inflation”.

Housing represents about one-third of the value of the basket of goods and services used by the US Bureau of Labor Statistics to track consumer prices, giving it significant weight in the overall inflation picture. Early in 2022, it was a contributor to rising inflation along with food and energy.

The refuge index rose 5.5% last year, according to data for May. This was the largest increase since February 1991.

It is already remarkable. But Citi’s economists warn that the data may be slow to reflect the environment for tenants, which means that there is a chance that housing costs will jump by even more than expected in the coming months.

Check this out: Rental rates in Manhattan reached record highs in May for the fourth month in a row. The median rent for an apartment rose to $ 4,000 a month, up 25% from a year ago – and that’s before high summer for leases.

Buyers also continue to feel the effects of record house prices, although rising mortgage costs are encouraging some Americans to postpone purchases.

“In general, while housing demand has recently shown signs of declining, house prices continue to rise at a strong pace, suggesting that it will take some time (well into next year) for house prices to start declining further,” said the Citis team.

On the radar: The Federal Reserve Bank of San Francisco wrote in February that rents and house prices could push up the CPI reading “as long as 24 months into the future.” It can complicate “peak inflation” hopes.

China’s economy looks brighter. It is not clear yet

From big gains in technology stocks to robust trading data, China has had a lot of good economic news this week.

The positive development comes after the world’s second largest economy was hit by extensive Covid closures, a major impact on technology companies and a decline in real estate. Both consumption costs and factory production shrank sharply in April, while unemployment has risen to the highest level since the first coronavirus outbreak in early 2020.

As China takes steps to gradually reopen businesses, and the authorities introduce a series of measures to stimulate activity, there are signs that a revival may be around the corner, reports my CNN Business colleague Laura He.

Remember: Earlier this week, The Wall Street Journal reported that Beijing’s cyber security review of Didi was nearing completion. The move would allow the giant to return to app stores in mainland China, almost a year after Didi was removed for privacy breaches. Chinese technology stocks rose.

There were other signs that Beijing’s efforts to rein in technology companies could also slow down. Bloomberg said that Chinese regulators have started early discussions about a potential revival of Ant Group’s public offerings, quoting people familiar with the matter.

China also released strong trade data for May, following a decline in April. The country’s exports increased by almost 17% in May from a year ago, compared with only 3.9% growth in April. Imports rose for the first time in three months.

Nevertheless, analysts say more needs to be done to repair investor confidence in China, and some major risks have not disappeared.

“It will take time to restore business confidence, and the sale of Chinese assets may resume if China data proves to be disappointing again,” said Ken Cheung, chief foreign exchange strategist at Mizuho Bank.

Americans lost half a trillion dollars in wealth in early 2022

Sometimes fluctuations in stock prices can feel abstract. But this year’s market turmoil has had real consequences, wiping out billions of dollars in Americans’ wealth.

The net worth of households and nonprofits fell half a trillion dollars to about $ 149 trillion in the first quarter, according to Federal Reserve data released Thursday.

It is a remarkable turnaround from the robust wealth growth that began in mid-2020, driven by sky-high housing and stock prices.

Fast rewind: The Dow and S&P 500 each fell almost 5% in the first three months of the year, while the Nasdaq fell almost 9%. It was the worst quarterly result for the markets since the first quarter of 2020, when the Covid-19 pandemic turned the US economy around.

The decline in equities was partially offset by a $ 1.7 trillion increase in property value and a continued high level of personal savings. The ratio between households’ net wealth and disposable income remained close to record highs and continues to be well above the level before the 2019 pandemic.

But the data is a reminder of why so many Americans have felt miserable about the health of the economy.

Although spending remains robust, and most economists do not expect a recession this year, market sales have weakened overall sentiment as the value of trading portfolios and pension accounts declines. About 58% of Americans own stocks, according to Gallup.


The latest reading of the US Consumer Price Index comes at 8:30 ET.

Also today: University of Michigan’s early reading of data on consumer sentiment for June posts at. 10 ET.

Coming next week: The European Central Bank’s hawkish tour disrupted markets on Thursday. Attention will now be drawn to the Federal Reserve, which announced its latest political decision this Wednesday.

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