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FTSE 100 today: Blue-chip set for muted open ahead of Fed decision; UK jobs data key for direction

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FTSE 100 today: Blue-chip set for muted open ahead of Fed decision; UK jobs data key for direction

Moving markets today: US stocks hit record highs, Asian markets mixed; oil prices climb, Apple shares fall post AI demo; focus on UK employment and US treasury auctions 

US stock markets reached new record highs, but investors remained cautious ahead of key reports on consumer prices and the Federal Reserve’s policy announcement. In Asia, stock markets showed mixed trends as investors reacted to political developments in Europe, including right-wing gains in elections and a snap poll in France, which raised concerns about the bloc’s stability. Oil prices continued their upward momentum on news of potential US crude purchases for reserves. Gold prices experienced a slight decline as traders monitored US inflation data and awaited the Fed meeting. Apple’s shares declined following a demonstration of its AI technology. Investors will focus on the UK employment report for April, while the Federal Reserve’s two-day meeting begins. UK stocks slipped on Monday, and futures suggest a quiet start to Tuesday’s trading. Here are five key takeaways for your day. 

Apple shares dip following AI demo

Apple announced on Monday that it’s teaming up with OpenAI to integrate ChatGPT into its devices, signalling a significant move towards embracing generative artificial intelligence and large language models, as highlighted by CEO Tim Cook. However, despite this promising development, the response from Wall Street was lukewarm.  

Investors were expecting more groundbreaking AI features and assurances that could position Apple competitively against industry leader Microsoft in the AI domain. Consequently, Apple’s stock saw a nearly 2 per cent decline in its value. Although Apple’s stock had surged by 13 per cent in the month leading up to the event, it still trails behind other major tech firms in performance this year. 

Oil prices surge further on potential US crude reserve acquisition

Oil prices rose on Tuesday, bolstered by expectations of higher seasonal fuel demand and potential US crude purchases for its reserves, despite a stronger dollar. Brent crude futures increased by 0.3 per cent to $81.91 per barrel, while US West Texas Intermediate crude futures rose by 0.4 per cent to $78.05. The previous day, prices had surged about 3 per cent to a one-week high on anticipation of increased summer fuel demand, despite the dollar’s rise amid expectations of prolonged higher interest rates by the US Federal Reserve. 

Australian business environment deteriorates in May

Australian business conditions fell below their long-term average due to slower sales and profit growth in May, according to a NAB survey. The business conditions index dropped to +6, and the business confidence index fell to -3, while cost pressures began to rise again. 

What’s on the radar

This week is significant for major interest rate decisions. The US Federal Reserve is anticipated to keep rates steady at a 23-year high of 5.25 per cent to 5.5 per cent, while the Bank of Japan is expected to maintain its rates at 0 per cent to 0.1 per cent.  

The US inflation data for May, which will be released just before the Fed’s announcement on Wednesday, could confirm expectations for future rate cuts, particularly if it shows ongoing easing amid economic slowdown signals. 

In the UK, Tuesday’s jobs report will be closely watched to determine if wage pressures are easing enough to hint at a possible rate cut by the Bank of England soon. Additionally, April’s GDP data, due on Wednesday, is expected to indicate a slowdown following a robust 0.6 per cent growth in the first quarter. 

Markets are also looking forward to the monthly oil supply and demand reports from the US Energy Information Administration and OPEC on Tuesday, and the International Energy Agency’s report on Wednesday. 

Asian markets mixed as European political risks increase

The Dow Jones Industrial Average increased by 0.18 per cent to 38,868.04, while the S&P 500 climbed 0.26 per cent to 5,360.79, and the Nasdaq Composite advanced 0.35 per cent to 17,192.53.  

The S&P 500’s rise was mainly fueled by gains in the utilities and energy sectors, and the tech-heavy Nasdaq Composite was driven up by improvements in five of the Magnificent Seven stocks. 

Southwest Airlines saw a significant jump of 7 per cent after activist investor Elliott Investment Management announced a $1.9 billion stake in the company.  

Diamond Offshore Drilling’s shares soared by 10.9 per cent following news that oilfield services company Noble would acquire it in a $1.59 billion deal, leading to a 6.1 per cent increase in Noble’s shares. 

In Asia, Chinese blue chips CSI300 dropped by 0.7 per cent, Japan’s Nikkei 225 edged up by 0.3 per cent, and South Korea’s KS11 rose by 0.5 per cent. European markets saw EUROSTOXX 50 futures gain 0.2 per cent, stabilizing after a dip on Monday.  

The UK’s FTSE 100 fell by 0.2 per cent, and the mid-cap FTSE 250 declined by 0.5 per cent for the second consecutive session. Futures suggest a quiet start for Tuesday, with FTSE 100 futures remaining nearly flat at 8235.5. 

S&P 500 futures and Nasdaq futures both fell by 0.1 per cent in Asian trading after small gains on Monday.  

Gold prices stayed just above one-month lows at $2,306 an ounce, influenced by shifting market expectations regarding US interest rate cuts.

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