U.S. CPI Ahead, Apple Shares Hit Record-High Close: What's Moving the Markets? | Inflation Update

On June 13, 2023, the financial markets are focused on two key events: the release of the May U.S. inflation data and Apple's record-high close. Additionally, U.S. regulators are seeking to temporarily block Microsoft's mega-merger with Activision Blizzard.




1. U.S. inflation data in focus




Market participants are closely watching the latest U.S. inflation data, as it could have a significant impact on the Federal Reserve's upcoming decision on interest rates. Economists estimate that the May consumer price index (CPI) will rise by 4.1% on an annual basis, slightly lower than the previous level of 4.9%. The month-on-month gauge is expected to increase by 0.2%, decelerating from 0.4% in April.




The annual and monthly core CPI readings, which exclude volatile items like food and energy, are projected to climb by 5.3% and 0.4%, respectively. The Federal Reserve has been raising interest rates to combat elevated inflation, and today's CPI data will play a crucial role in determining whether the central bank will pause its policy-tightening campaign or continue to raise borrowing costs.




According to Investing.com's Fed Rate Monitor Tool, there is a 71% probability that policymakers will keep the fed funds rate steady at a range of 5.00% to 5.25%. The probability of a 25 basis point increase stands at just over 28%.




2. U.S. futures indicate positive sentiment




U.S. stock futures are pointing higher as traders await the release of the inflation data and the start of the Federal Reserve's rates meeting. By 05:14 ET, the S&P 500 futures contract rose by 0.28%, Dow futures gained 0.04%, and Nasdaq 100 futures increased by 0.59%.




The previous session saw a surge in stock prices, driven by the continued interest in tech shares related to artificial intelligence. The benchmark S&P 500 reached its highest close in over a year, while the tech-heavy Nasdaq Composite rose by 1.53% and the Dow Jones Industrial Average climbed by 0.56%.




Although not reaching the record highs seen in early 2022, the main indices have been supported by the growing interest in AI, leading to a rally in the semiconductor and software sectors.




3. Apple shares reach a record high




Shares in Apple (NASDAQ:AAPL) experienced a slight decline in after-hours trading after reaching a record-high close of $183.79 on June 12. The surge in share price follows Apple's unveiling of its new Vision Pro mixed reality headset at the company's annual developers conference last week. This product represents Apple's first hardware launch since 2014.




Despite its high price tag of $3,499, the Vision Pro headset is widely regarded as a significant advancement in the evolution of virtual reality headsets. Experts hope that Apple's reputation for design and brand loyalty will attract consumers. However, some analysts have raised concerns about Apple, with UBS downgrading their rating of the stock due to an expected slowdown in iPhone unit growth.




4. FTC seeks halt to Microsoft-Activision mega-deal




U.S. antitrust regulators have requested a temporary block on Microsoft's (NASDAQ:MSFT) $69 billion acquisition of Activision Blizzard (NASDAQ:ATVI). This move poses a potential legal obstacle for the gaming industry's largest-ever deal. The Federal Trade Commission (FTC) is already scheduled to begin legal proceedings in August and is now asking the court to prevent the deal from being finalized until a decision is made.




The FTC argues that the




merger, which would give Microsoft control over the popular video game title Call of Duty, would provide the tech giant with the ability and incentive to undermine Activision's content in a way that substantially reduces competition. Microsoft's president and vice-chair, Brad Smith, has expressed his willingness to defend the merger in a federal court.




5. China's central bank reduces short-term lending rate




The People's Bank of China (PBoC) has cut its key seven-day reverse repo rate by 10 basis points, signaling Beijing's intention to support the post-pandemic recovery in the world's second-largest economy. This move may indicate that longer-term interest rates could also decrease in the near future, given weak demand and investor sentiment.




Analysts quoted by Reuters suggest that the rate cut reflects the increasing concerns of China's central bank about the country's growth outlook. The rebound in economic activity, following the easing of COVID-era restrictions, is showing signs of fading, evident in declining exports and manufacturing activity. In addition, Bloomberg News reports that Beijing is considering new stimulus measures to revive the slumping property sector, which has been affected by defaults and project suspensions.




In conclusion, the financial markets are closely monitoring the U.S. inflation data, which could influence the Federal Reserve's interest rate decision. Apple's record-high close and the regulatory challenges facing Microsoft's merger with Activision Blizzard are also major factors shaping market movements. Moreover, China's central bank's rate cut reflects concerns about the country's economic outlook and potential stimulus measures in the property sector.