Equity futures pointed to advances in Sydney, Tokyo and Hong Kong after the S&P 500 closed 0.6% higher. Tesla Inc. led gains in megacaps. Bonds barely budged after a $58 billion sale of three-year notes, the first in a trio of offerings that will culminate in Thursday’s sale of 30-year debt. The dollar saw small moves ahead of a key inflation report, while Bitcoin tested its record high.
Talks between the US and China extended into their second day in London, with a Treasury official saying the teams were trying to iron out technical details.
“Any materially positive or negative trade-talk headlines out of London, where US and Chinese negotiations remain underway, could meaningfully move markets,” said Tom Essaye at The Sevens Report.
Data Wednesday is expected to show US consumers probably saw slightly faster inflation in May, notably for merchandise, as companies gradually pass along higher import duties. That may reinforce the Federal Reserve’s wait-and-see stance toward further easing as it assesses the impact of tariffs, with traders increasingly betting that the central bank will cut interest rates just once this year.
Prices of goods and services, excluding volatile food and energy costs, are expected to show a 0.3% advance in May, the most in four months. The so-called core consumer price index, which is regarded as a better indicator of underlying inflation, is seen accelerating for the first time this year — to 2.9% — on an annual basis, based on the median projection.A survey conducted by 22V Research showed 42% of investors believe that the market reaction to CPI data will be “risk-on”, 33% said “mixed” and 25% “risk-off”. It’s the first time the reaction has favored risk-on since August 2024, 22V said.“The combination of the May inflation figures and upcoming Treasury supply will provide investors tradable events and add to the market’s collective understanding of the early fallout from the trade war as well as demand for US debt in the current environment,” said Ian Lyngen at BMO Capital Markets.
Yields on long-term global debt have soared in recent weeks as concern over spiraling debt and deficits led some investors to shun the securities and prompted others to demand a higher premium for the risk of lending to governments.
Investors betting that yields on long-dated Treasuries will keep rising faster than those on shorter notes risk getting burned, according to BNP Paribas SA’s Guneet Dhingra. He said 30-year bonds already price in the worsening fiscal picture and could rebound if there’s strong demand for an auction or deficit fears ease.
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