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MORNING BID-A new deal and the inflation blues

·2 min read

A look at the day ahead from Dhara Ranasinghe. As a U.S. bipartisan Senate infrastructure deal cheers world markets towards record highs, only a nasty surprise from a key U.S. inflation reading on Friday could prevent smooth sailing into the weekend. 

  The core personal consumption expenditures index, an inflation gauge tracked closely by the Federal Reserve, is expected to post year-on-year gains of 3.4%. 

  That would be a rise even faster than the nearly three-decade high pace of 3.1% recorded last month and though Fed officials have gone to great lengths this week to point that price pressures remain transitory, bond markets will be on guard for a bigger increase. The data is due at 1230 GMT. 

  A significant global bond market correction is likely in the next three months as central bankers eye the exit door from pandemic emergency policy, a latest Reuters poll finds. 

  Meanwhile, a fresh U.S. stimulus deal should support sentiment in world stock markets. 

  Bipartisan agreement of a $579 billion infrastructure bill, is less than the Democrats would have liked but is a "decent addition" to recent stimulus packages, analysts reckon. 

  Investors appear to agree — U.S. stocks hit fresh record highs on Thursday, lifting Asian equity markets on Friday. European and U.S. stock futures are higher too. 

  Coronavirus meanwhile remained in the spotlight with downtown Sydney and the city's eastern suburbs, to go into a one week lockdown from midnight Friday as authorities struggle to contain a spike in the highly contagious Delta COVID-19 virus variant. 

  Ride-hailing giant Didi Chuxing is also in focus as it aims for a valuation of over $60 billion in its New York listing, less than initially expected due to worries about its growth prospects, according to sources. 

  The world's largest mobility-technology platform plans to start trading in New York on Wednesday after a short roadshow for investors for its keenly awaited initial public offering. 

  Key developments that should provide more direction to markets on Friday: 

  - Shareholders at crisis-ridden Toshiba Corp vote out its board chairman 

  - Panasonic sells its stake in electric car maker Tesla for about $3.61 billion. 

  - Mexico hikes its key interest rate by 25 bps to 4.25%. 

  - UK GfK consumer confidence for June holds at 14-month high. 

  - U.S. Michigan June sentiment final. 

  (Reporting by Dhara Ranasinghe; Editing by Saikat Chatterjee)