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Rate Cut Optimism May Lead To Rebound On Wall Street

(RTTNews) - The major U.S. index futures are pointing to a higher opening on Thursday, with stocks likely to rebound following the modest pullback seen over the two previous sessions.

A report from the Labor Department showing bigger than expected decreases in U.S. import and export prices may add to recent optimism that tame inflation will lead the Federal Reserve to cut interest rates in the near future.

After helping to lead the markets lower in the previous sessions, energy stocks may rebound along with the price of crude oil.

Crude for July delivery is jumping by more than $2 a barrel amid reports of a possible terrorist attack on oil tankers in the Gulf of Oman near the Iranian coastline.

Stocks turned in a relatively lackluster performance during trading on Wednesday before ending the session modestly lower. The major averages added to the slim losses posted on Tuesday, although selling pressure remained subdued.

After snapping a six-day winning streak on Tuesday, the Dow edged down 43.68 points or 0.2 percent to 26,004.83. The tech-heavy Nasdaq fell 29.85 points or 0.4 percent to 7,792.72 and the S&P 500 dipped 5.88 points or 0.2 percent to 2,879.84.

The modest weakness on Wall Street came as traders weighed lingering trade concerns against optimism about an interest rate cut by the Federal Reserve.

The U.S.-China trade conflict largely took a back seat to President Donald Trump's threatened tariffs on Mexico but has moved back into the spotlight ahead of the G20 summit later this month.

In remarks to reporters on Tuesday, Trump suggested he has "no interest" in negotiating unless China agrees to come back to the table to discuss previous terms of a deal he has claimed was nearly complete.

Trump said he expects to meet with Chinese President Xi Jinping at the G20 summit and has warned that he will impose new tariffs on Chinese goods if his counterpart does not attend.

Partly offsetting the negative sentiment about trade, another report showing tame inflation has further fueled expectations that the Federal Reserve will cut interest rates in the near future.

The Labor Department said its consumer price index inched up by 0.1 percent in May after rising by 0.3 percent in April. The uptick in prices matched economist estimates.

Excluding food and energy prices, core consumer prices also edged up by 0.1 percent for the fourth consecutive month. Economists had expected core prices to rise by 0.2 percent.

The report also showed a slowdown in the annual rate of consumer price growth, with the headline index up by 1.8 percent year-over-year in May compared to the 2.0 percent increase in April.

The annual rate of core consumer price growth also slowed to 2.0 percent in May from 2.1 percent in the previous month.

"Tariff changes may eventually push up some goods prices, while apparel prices should soon rebound," said ING Chief International Economist James Knightley. "But for now, inflation pressures in aggregate remain benign."

He added, "As such, financial markets will see little reason for the Federal Reserve to hold back from rate cuts in coming months to combat the perceived threat of a slowdown caused by intensifying trade tensions."

Energy stocks moved sharply lower over the course of the session, dragged down by a steep drop by the price of crude oil.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index plummeted by 5.1 percent, the NYSE Arca Natural Gas Index tumbled by 3 percent and the NYSE Arca Oil Index slumped by 1.4 percent.

Considerable weakness also emerged among semiconductor stocks, as reflected by the 2.3 percent nosedive by the Philadelphia Semiconductor Index.

Financial, tobacco, and computer hardware stocks also saw notable weakness on the day, while significant strength was visible among gold, utilities and pharmaceutical stocks.

Commodity, Currency Markets

Crude oil futures are surging up $2.03 to $53.17 a barrel after plunging $2.13 to $51.14 a barrel a barrel on Wednesday. Meanwhile, an ounce of gold is trading at $1,339.60, up $2.80 compared to the previous session's close of $1,336.80. On Wednesday, gold rose $5.60.

On the currency front, the U.S. dollar is trading at 108.47 yen compared to the 108.50 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1275 compared to yesterday's $1.1287.

Asia

Asian stocks ended mostly lower in cautious trading on Thursday, with tumbling oil prices, Hong Kong protests and uncertainty ahead of the upcoming G20 summit keeping investors on the sidelines.

Chinese shares ended roughly flat as Vice Premier Liu He called for more measures to support the economy and central bank data showed the country's bank lending increased in May. The benchmark Shanghai Composite Index inched up 1.36 points or 0.1 percent to 2,910.74.

Banks extended 1.18 trillion yuan in new loans in May compared to 1.02 trillion yuan in April. However, this was below the forecast of 1.3 trillion yuan.

Hong Kong's Hang Seng Index edged down 13.75 points or 0.1 percent to 27,294.71 as investors kept a close eye on violent protests over an extradition bill that would allow people to be sent to mainland China for trial.

Japanese shares fell, dragged down by chipmakers after the Philadelphia Semiconductor Index dropped 2.3 percent on concerns of a slowdown in China.

The Nikkei 225 Index ended down 97.72 points or 0.5 percent at 21,032 ahead of the June settlement of Japanese stock futures and options on Friday. The broader Topix closed 0.8 percent lower at 1,541.50.

Advantest plunged 5 percent and Tokyo Electron slumped 4.2 percent after technology stocks accounted for much of the slide on Wall Street overnight.

Japan Display plummeted almost 12 percent as the struggling smartphone screen maker announced its decision to cut staff, reduce pay and take more write-offs.

Lender Mitsubishi UFJ Financial Group fell 1.3 percent and Sumitomo Mitsui Financial Group declined 1 percent as the prospects of a U.S. interest rate cut brightened.

Australian markets fluctuated before ending lower as tumbling oil prices hit energy stocks, offsetting gains in the financial sector.

Investors also reacted to the latest employment report flashing mixed signals. While employment gains exceeded expectations, the unemployment rate held steady at 5.2 percent, higher than the 5.1 percent forecast.

The benchmark S&P/ASX 200 Index ended marginally lower at 6,542.40, while the broader All Ordinaries Index dipped 0.2 percent to 6,619.10.

Woodside Petroleum, Oil Search, Origin Energy and Santos dropped 1-2 percent after oil prices slumped 4 percent overnight, pressured by an unexpected rise in U.S. crude inventories and concerns of a dimming outlook for global oil demand. Beach Energy shares plunged 5.7 percent.

Mining heavyweights BHP and Rio Tinto dropped around half a percent as copper prices slipped following disappointing data from China. Smaller rival Fortescue Metals Group tumbled 3 percent.

Conglomerate Wesfarmers plummeted 5.2 percent as it forecast falling annual earnings at its Kmart discount retail chain for the first time in a decade.

AfterPay Touch lost 12 percent as the federal financial intelligence agency AUSTRAC ordered the appointment of an external auditor to probe the company's compliance with money laundering and terrorism financing laws.

Meanwhile, banks ANZ, Commonwealth and Westpac ended modestly higher on expectations of one more rate cut by the Reserve Bank of Australia given subdued inflation and weak economic growth.

Export-driven healthcare stocks also gained ground as the Aussie dollar nosedived after the release of jobs data. CSL rallied 2.3 percent and Cochlear added 0.6 percent.

Seoul stocks closed lower for the second straight day as investors fretted about the outlook for the chip-making sector. The benchmark Kospi gave up 5.60 points or 0.3 percent to close at 2,103.15. Samsung Electronics declined 1.9 percent and SK Hynix tumbled 3.4 percent.

Europe

European stocks have moved mostly higher on Thursday after a measure of U.S. consumer prices barely rose in May, bolstering expectations for Fed rate cuts this year.

However, the upside remains limited as euro-area finance ministers meet in Luxembourg to discuss disciplinary action on Italy over its debt load.

Elsewhere, the 10 candidates running to replace Britain's outgoing Prime Minister Theresa May are facing the first round of voting today.

While the German DAX Index has climbed by 0.4 percent, the U.K.'s FTSE 100 Index is up by 0.1 percent and the French CAC 40 Index is just above the unchanged line.

TelefA?nica Deutschland has rallied after it received 90 MHz nationwide spectrum for the mobile radio standard 5G through 2040.

Wm Morrison Supermarkets has also advanced. The company said it was expanding its collaboration with e-Commerce giant Amazon to many more cities across the U.K.

Packaging products maker DS Smith has also jumped after reporting a strong set of annual results, while shares of Thales have advanced in Paris after the technology company lifted its forecast for fiscal 2019 EBIT and order intake.

On the other hand, copper producer Aurubis has slumped. The company said its chief executive will leave two weeks earlier than planned.

In economic news, the Swiss National Bank today introduced the SNB policy rate, replacing the three-month Libor, saying the future of the Libor is not guaranteed. The SNB maintained its expansionary monetary policy as before.

Eurozone industrial production fell at the fastest rate in four months in April, figures from Eurostat showed. Industrial production declined 0.5 percent month-on-month in April, following a 0.4 percent drop in March.

The decrease in production, which was in line with estimates, was the worst since last December, when production was down 0.9 percent.

German consumer price inflation eased to 1.4 percent in May from 2 percent in April, final data from Destatis revealed. The rate came in line with the estimate published on May 31.

U.S. Economic Reports

In the third inflation-related report of the week, the Labor Department revealed Thursday that U.S. import and export prices both dropped by more than expected in the month of May.

The Labor Department said import prices fell by 0.3 percent in May following a revised 0.1 percent uptick in April.

Economists had expected imports prices to dip by 0.2 percent compared to the 0.2 percent increase originally reported for the previous month.

Additionally, the report said export prices edged down by 0.2 percent in May after inching up by a revised 0.1 percent in April.

Export prices had been expected to slip by 0.1 percent compared to the 0.2 percent growth originally reported for the previous month.

Meanwhile, a separate report from the Labor Department said first-time claims for U.S. unemployment benefits unexpectedly edged higher in the week ended June 8th.

The report said initial jobless claims inched up to 222,000, an increase of 3,000 from the previous week's revised level of 219,000.

The uptick came as a surprise to economists, who had expected jobless claims to edge down to 216,000 from the 218,000 originally reported for the previous week.

At 1 pm ET, the Treasury Department is scheduled to announce the results of its auction of $16 billion worth of thirty-year bonds.

Stocks In Focus

Shares of Tyson Foods (TSN) are moving notably higher in pre-market trading after the meat producer introduced its first plant-based and blended products in an effort to fight back against alternative protein companies like Beyond Meat (BYND).

Yogawear maker Lululemon (LULU) may also move to the upside after reporting better than expected fiscal first quarter results and raising its full-year guidance.

Shares of RH (RH) are also seeing significant pre-market strength after the home furnishings company reported fiscal first quarter results that exceeded estimates and raised its full-year forecast.
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