U.S. stock futures decline ahead of inflation reading

12 Jun 2019

U.S. stock futures decline ahead of inflation reading

By Shreyashi Sanyal

U.S. stock index futures dropped on Wednesday ahead of inflation data as trade worries returned to the forefront and weighed on sentiment after Washington took a tough stance on its talks with China.

President Donald Trump said he was holding up a trade deal with China and had no interest in moving ahead unless Beijing agrees to four or five major points, which led the blue-chip Dow index to snap a six-day winning streak on Tuesday.

With under three weeks to go before proposed talks between the United States and Chinese leaders, sources say there has been little preparation for a meeting even as the health of the world economy is at stake.

Trump also said that interest rates were "way too high", ahead of a reading on U.S. inflation that could shift the odds toward a cut in rates as soon as July.

Hopes that the Federal Reserve will act to counter a slowing global economy due to escalating trade war have spurred a rally in stocks this month, with the S&P 500 index up about 5% so far in June.

Fed policymakers will meet on June 18-19 and markets have priced in at least two rate cuts by the end of 2019. Fed fund futures imply around an 80% chance of an easing as soon as July.

That might change depending on what U.S. consumer price data show at 8:30 a.m. ET. Headline inflation is expected to slow to 1.9%, with the core rate, excluding volatile items such as food and energy, steady at 2.1% on a year-on-year basis for May.

Investors will closely watch the data for further evidence of inflation after U.S. producer prices increased solidly for a second straight month in May, in line with expectations of economists polled by Reuters.

Meanwhile, concerns of a slowdown in China rose as data showed factory inflation slowed in May and the country reported the worst-ever monthly sales drop.

At 7:17 a.m. ET, Dow e-minis were down 63 points, or 0.24%. S&P 500 e-minis were down 6.5 points, or 0.23% and Nasdaq 100 e-minis were down 31.25 points, or 0.42%.

Trade-sensitive Caterpillar Inc (NYSE:CAT) dipped 0.1%, while Boeing (NYSE:BA) Co dropped 0.7% in premarket trading.

Chipmakers and semiconductor equipment makers, which get a sizeable portion of revenue from China, declined, with Micron Technology Inc (NASDAQ:MU), Nvidia Corp and Applied Materials Inc (NASDAQ:AMAT) trading down between 1.6% and 3%.

Qualcomm (NASDAQ:QCOM) Inc slipped 4% after smartphone maker LG Electronics Inc and U.S. Federal Trade Commission opposed the chip supplier's efforts to put a sweeping U.S. antitrust decision on hold.

Medidata Solutions fell 4.3% after France's Dassault Systemes agreed to buy the U.S. firm focused on clinical trials for $92.25 per share, a discount of 3% to its last close.

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