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Top 5 Things to Know in The Market on Thursday

These are the top 5 things you need to know in financial markets on Thursday, 23 May.

PMIs Deepen Trade War Gloom

Another round of gloomy business surveys in Europe reinforced fears that the effects of the U.S.-China trade conflict are spreading across the world economy. The Eurozone purchasing managers’ index for manufacturing fell to 47.7 in May, disappointing hopes that the worst of the slowdown was over. Germany’s Ifo business climate also worsened.

Elsewhere, Japanese electronics giant Panasonic indicated that it, too, would partly curtail business with Huawei, although it told a different story on its Chinese website. The news follows the decision of various network carriers to pull Huawei’s latest smartphones from their 5G offerings.

Meanwhile, The Wall Street Journal reported that CNEX Labs, a chip startup backed by Microsoft (NASDAQ:MSFT) and Dell, had accused a senior executive at Huawei of conspiring to steal its trade secrets.

2. Wall Street Set to Open Lower

The stock market is set for another rocky session on Thursday, after the PMI disappointments in Japan and Europe dragged bourses lower again.

At 05:30 AM ET, the S&P 500 futures contract was down 29.4 points and the Dow futures contract was down 251 points, both declines of 1.0%, while the tech-heavy Nasdaq 100 contract was underperforming again, down 104 points, or 1.4%.

Best Buy (NYSE:BBY), Medtronic (NYSE:MDT) and HP (NYSE:HPQ) lead a thinning list of companies reporting on Thursday as the first-quarter earnings season draws to a close.

3. Fed Minutes Indicate No Rate Change Soon

Minutes from the Federal Reserve’s last policy meeting at the start of the month indicated that the Fed is still some way from a shift towards cutting interest rates, despite a rally in short-dated bonds this month that seems to assume it will.

At the meeting, which predated the sharp escalation of the U.S.-China trade conflict later in May, policy-makers indicated that they were comfortable with the current level of rates and expected the string of weak inflation readings at the start of the year to be temporary.

The bond market has resumed its bets on monetary easing this morning, with two-year Treasury yields falling 4 basis points to 2.19%, their lowest in a week.

4. FAA Signals Long Grounding for 737 MAX

Boeing’s 737 MAX aircraft may be idled for much longer than many of the airlines that use them have reckoned.

Daniel Elwell, acting head of the Federal Aviation Authority, told reporters that Boeing (NYSE:BA) had not yet submitted a fix for the software problem that is suspected of causing two fatal crashes, and added that the FAA hasn’t yet decided whether to order fresh training for pilots when the fix is ready, a potentially time-consuming drill.

The FAA is due to meet with 30 other international air regulators Thursday. The European Aviation Safety Agency has already indicated it won’t let the 737 MAX fly again before it has independently checked the remedial measures.

5. Rough Winds Do Shake the Dueling Buddies of May

The world’s largest election is over, and its second-largest one is about to begin.

The first has resulted in a landslide victory for incumbent Indian Prime Minister Narendra Modi, which has pushed Indian stocks to new record highs.

The second, to the European Parliament, begins today and isn’t likely to encourage confidence in any financial asset beyond safe havens. The elections are set to see another rise in votes for populist parties, largely of a nationalist and right-wing hue.

In the U.K., the poll should give the coup de grace to Prime Minister Theresa May, whose Conservatives are trailing in 5th place according to some opinion polls. May’s most senior party ally in the House of Commons, Andrea Leadsom, resigned on Wednesday rather than re-introduce the EU Withdrawal Agreement bill to the House for a fourth vote. Leadsom's move strengthens her hand in the looming battle for the Conservative party leadership. The British pound slid to a new five-month low against the dollar in early trade in Europe.

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