U.S. equity futures traded mixed Friday, following on from a late-hour sell-off on Wall Street that loped more than 600 points from the Dow, as investors nervously awaited a crucial reading of May inflation ahead of the start of trading.
Core consumer price pressures are expected to moderate from multi-decade peaks, according to consensus forecasts for Friday’s all-important CPI reading, but the ongoing surge in oil and energy prices is likely to hold the annual pace of headline inflation in place at around 8.3%.
The data will not only provide details as to the pressures faced by American consumers — whose spending drives around two-thirds of the world’s biggest economy — but also the near-term reaction of the Federal Reserve, which is tasked with brining inflation back closer to its preferred 2% target with rate hikes and liquidity pullbacks.
And while a 50 basis point rate hike from the Fed next week is a virtual lock, the CME Group’s FedWatch tool now suggests an 18% chance of a 75 basis point rate hike in July, up from just 10% a month ago. Part of that move is linked to the European Central Bank’s recent hawkishness, and bets that Christine Lagarde and her colleagues will lift rates this summer, with deeper hikes in the fall, as inflation hits record highs in the single-currency area.