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Top 5 Things to Know in the Market on Wednesday

EconomyMay 30, 2018 05:57AM ET
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© Reuters. 5 key factors for the markets on Wednesday - Here are the top five things you need to know in financial markets on Wednesday, May 30:

1. Italian political uncertainty remains in focus

After political uncertainty in Italy rattled global markets a day earlier, causing a selloff in stocks and pushing the euro to 10-month lows against the dollar, a pause seemed to ensue on Wednesday, while markets continued to follow developments.

Last-ditch efforts to form a government in Italy showed little sign of succeeding on Wednesday, with major parties calling instead for repeat elections in July, a vote investors fear could become a de facto referendum on the single currency as euro sceptics remained strong in polls.

Prime minister-designate Carlo Cottarelli, tasked by the head of state with calming political turmoil and overseeing fresh elections after the summer, has failed so far to find support from any major party for even a stopgap administration.

The major parties in Italy were reportedly calling instead for President Sergio Mattarella to dissolve parliament immediately and send the euro zone's third-largest economy back to the polls on July 29, less than four months after the inconclusive March 4 vote.

However, some recent reports suggested that the two anti-establishment parties, the 5-Star Movement and League, were working on trying to find "a point of compromise on another name" for the economy ministry. Any agreement could lead to a a renewed attempt to form a coalition government.

Providing some relief, an auction of Italian 10-year bonds saw the strongest demand since December, although it was unclear how much of that may have been attributed to the European Central Bank’s asset purchase program.

2. U.S.-China trade tensions on watch

Market participants are also keeping a close eye on developments surrounding trade between the U.S. and China after President Donald Trump said Tuesday that he would move ahead with $50 billion in tariffs on Chinese imports. The White House indicated that the list of targeted products should be produced by June 15 and implementation should be undertaken “shortly thereafter”.

China’s commerce ministry responded quickly overnight that it was surprised by the announcement and remains confident the country can protect its interests.

China’s foreign ministry followed the same script on Wednesday, stating that it did not want a trade war with the U.S., but insisting it was not afraid of one.

The noise comes before U.S. commerce secretary Wilbur Ross heads to China for trade talks on June 2-4.

3. Global stocks struggle to recover

Following Wall Street’s negative close a day earlier, Asian shares extended the global selloff on Wednesday as Italy's political crisis rippled across financial markets. Japan’s Nikkei 225 ended with losses of 1.5% while Chinas Shanghai composite tumbled 2.5%.

European stocks were showing mixed trade with Italy’s stock market notably at the head of the gainers as the benchmark recovered from five straight days of losses.

U.S. futures also pointed to slight recovery at the open on Wall Street. At 5:54AM ET (9:54GMT), the blue-chip Dow futures gained 105 points, or 0.43%, S&P 500 futures rose 11 points, or 0.39%, while the Nasdaq 100 futures traded up 21 points, or 0.30%.

4. Investors prep to respond to U.S. data deluge

A slew of top-tier economic data including the second estimate of U.S. first quarter GDP could refocus the narrative on underlying U.S. economic strength as markets struggle to recover from euro zone political concerns. The reading at 8:30AM ET (12:30GMT) is expected to show the economy expanded 2.3%, in-line with the preliminary estimate seen last month.

ADP nonfarm employment data due 8:15AM ET (12:15GMT), which often serves as a precursor to the monthly nonfarm payrolls data slated for Friday, is expected to show 190,000 private sector jobs were created in May, slightly below the 204,000 jobs created in the prior month.

Also on the docket, the Federal Reserve’s Beige Book, a report that includes anecdotal evidence on the health of the U.S. economy from its 12 regions, will be released at 2:00PM ET (18:00GMT).

While investors are still pricing in a rate hike for the June meeting, they have all but ruled out that there will be a total of four increases this year.

5. Oil prices recover while waiting on inventory data

Oil prices recovered from a week-long decline on Wednesday as investors finally took a break from punishing black gold over worries that OPEC and Russia could increase output as early as June in order to counter potential supply shortfalls from Venezuela and Iran.

U.S. crude oil futures gained 0.40% to $67.00 at 5:56AM ET (9:56GMT), while Brent oil advanced 0.68% to $76.00.

The recovery arrived as market participants turned their attention to fresh data on U.S. commercial crude inventories to gauge the strength of demand in the world’s largest oil consumer.

Industry group the American Petroleum Institute is due to release its weekly report at 4:30PM ET (2030GMT). Official data from the Energy Information Administration will be released Thursday, amid forecasts for an oil-stock gain of 2.2 million barrels.

Both reports come out one day later than usual because of the federal Memorial Day holiday on Monday.

Top 5 Things to Know in the Market on Wednesday

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