[Platinum Insights] (5.26.23)

Good morning.

Wall Street index futures were higher as investors refrained from making big bets amid ongoing U.S. debt ceiling talks that appear to have made some progress.

Global money market funds drew inflows for a fifth straight week in the seven days to May 24 as investors resorted to buying safer assets on caution with time running out for talks over raising the U.S. debt ceiling. Global equity funds faced $4.14 billion worth of net selling, the sixth weekly outflow in a row. Global bond funds saw $6.97 billion in net purchases during the week, the biggest weekly inflow since April 5.

Meanwhile, investors await the Commerce Department’s personal consumption expenditures (PCE) price index figures for April, considered to be the Federal Reserve’s preferred inflation gauge. Excluding the volatile food and energy components, the PCE price index is expected to have risen 0.3% last month, the same as in March.

JPMorgan Chase is developing a ChatGPT-like software service that leans on a disruptive form of artificial intelligence to select investments for customers. “It’s an A.I. program to select financial securities,” said trademark lawyer Josh Gerben. “This sounds to me like they’re trying to put my financial advisor out of business.”

WTI crude futures rebounded to trade above $72 a barrel. Gold rose toward $1,950 an ounce while the yield on the US 10-year Treasury note edged slightly lower.

U.S. markets will be closed on Monday in observance of Memorial Day.

On the week, the Dow Jones lost nearly 2% so far and the S&P 500 is down around 1% while the Nasdaq is up 0.3%.

The personal consumption expenditure prices in the US rose more than expected in April, reinforcing bets that the Federal Reserve will commit to its hawkish stance and leave rates elevated for a prolonged period. Core PCE, which excludes food and energy, increased 0.4 percent month-over-month in April 2023, above market expectations of a 0.3 percent gain. The annual rate, the Federal Reserve’s preferred gauge to measure inflation, unexpectedly accelerated to 4.7 percent, compared with market expectations of 4.6 percent. The headline PCE also increased 0.4% and was up 4.4% from a year ago, higher than the 4.2% rate in March.

Personal spending in the United States jumped 0.8% mom in April of 2023, the most in three months, and well above market forecasts of a 0.4% gain, in a sign consumer spending remains robust, supported by higher wages and a tight labour market. Within services, the largest contributors to the increase were spending for financial services and insurance, health care, and professional and other services. Within goods, spending for motor vehicles and parts, led by new motor vehicles and pharmaceutical products accounted the most for the rise.

Personal income in the United States rose by 0.4% mom in April of 2023, compared to a 0.3% rise in March and matching market forecasts. It is the highest gain in three months, primarily reflecting increases in compensation, namely private wages and salaries and personal income receipts on assets, both personal interest income and personal dividend income. On the other hand, personal current transfer receipts decreased, led by “other” government social benefits.

Have a great three-day weekend.