Here are the top five things you need to know in financial markets on Wednesday, May 18:
1. Fed minutes on tap as officials keep June live
Market participants look ahead to the meeting minutes from the last monetary policy decision of the Federal Reserve (Fed) that will be released at 18:00GMT, or 14:00ET, in the hopes that details will help gauge the positions of officials at the April gathering and shed light on the future path of monetary policy.
Wall Street dropped and the dollar strengthened on Tuesday as three Fed officials commented that they still believe there could be two or three rate hikes this year, despite the fact that financial markets were only pricing one in for 2016.
With Federal fund futures pricing in only a 15% chance of a rate hike at the next meeting in June, according to CME Group data, the remarks appeared to be an attempt to remind markets that all of the meetings are “live”, referring to the fact that the U.S. central bank could make a policy move at any time.
2. Japan dodges recession with stronger than expected growth
Japan surprised markets with a 1.7% annual expansion in first quarter gross domestic product (0.4% quarter-on-quarter), flying past expectations for growth of 0.2% and allowing the world’s third largest economy to escape recession.
Markets turned attention to whether Prime Minister Shinzo Abe will forge ahead with his plan to increase the sales tax to 10% from 8%.
The Nikkei reported that Abe had already decided to postpone the hike and would announce his decision after the G-7 meeting this weekend.
3. Oil trades flat while waiting for official inventory data
Oil prices traded flat on Wednesday, hovering near seven month highs while waiting for weekly data on crude stockpiles.
After markets closed Tuesday, the American Petroleum Institute, an industry group, said that U.S. oil inventories fell by a less-than-expected 1.2 million barrels in the week ended May 13.
The U.S. Energy Information Administration will release its weekly report on oil supplies at 14:30GMT, or 10:30AM ET, amid expectations for a drop of 2.9 million barrels.
U.S. crude oil futures slipped 0.04% to $48.30 at 10:00AM GMT, or 6:00AM ET, while Brent oil dipped 0.10% to $49.22.
4. European data give signals to central banks
U.K. unemployment remained at 5.1%, while wages continued to grow in the three months to March, according to data released on Wednesday.
The Bank of England (BoE) has been keeping an eye on average earnings for its implication for inflation as it waits for signs to move forward with policy tightening.
Similarly, the final read on euro zone consumer price index for April was confirmed to have fallen 0.2% year-on-year with no change from the prior month, while core inflation continued to creep lower, defying efforts by the European Central Bank (ECB) to fulfill its price stability mandate.
5. Global stocks trade lower on jitters over Fed rate hike
Chinese stocks led the losses on Wednesday as nerves were put on edge by the possibility of the Fed raising rates in June, though Japan almost escaped unscathed thanks to the positive economic data.
European stocks markets were trading mixed. At 10:05AM GMT, or 6:05AM ET, the European benchmark Euro Stoxx 50 edged up 0.03%, the DAX lost 0.17%, the CAC 40 fell 0.18% and London's FTSE 100 shed 0.30%.
In the U.S., futures traded flat after Tuesday’s rout. The Dow Jones Industrial Average futures pointed to a 0.01% gain, S&P 500 futures edged up 0.05%, while the Nasdaq 100 futures indicated a 0.04% rise.