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Dow Futures Gain After Mixed Jobs Report; Nasdaq Eases on G-7 Tax Deal

Inflation remains the key market focus again this week ahead of Thursday's May CPI reading and comments from Treasury Secretary Janet Yellen on the benefit of higher interest rates.

The Monday Market Minute

  • Global stocks rangebound following last week's softer-than-expected May payroll data and an historic, yet early stage, agreement on corporate taxes by G7 finance ministers.
  • The tax commitment calls for a minimum 15% corporate tax rate, but needs both G20 co-operation and the support of legislatures around the world before it can come into effect.
  • Oil prices ease from last week's multi-years highs as the dollar gains tractions and traders book profits.
  • Benchmark 10-year note yields ease to 1.579% while the dollar index gains 0.1% to trade at 90.187 following last week's payroll data.
  • CDC data shows 140 million Americans have now been fully vaccinated against the coronavirus, with around 301.6 million doses administered as of Sunday.
  • U.S. equity futures suggest a weaker open ahead of a muted week of data releases, but highlighted by a key reading of May inflation on Thursday. 

Wall Street futures traded modestly lower Monday, with Treasury yields in retreat and the dollar steady, as investors headed into yet another week dominated by inflation concerns, with a key reading of consumer prices Thursday set to provide the latest test to the Federal Reserve's low-rate stance. 

Last week's softer-than-expected employment report, which included the addition of 559,000 news jobs pared with 2% year-on-year gains in average hourly earnings, was a reminder to investors that faster inflation remains embedded in the economy even if labor markets continue to lag the broader domestic recovery. 

The Commerce Department will publish May CPI data on Thursday, following on from last month's decade-high rate of 4.2%, in what could be the sternest test yet to the Fed's "transitory" inflation narrative.

Treasury Secretary Janet Yellen offered an early assessment on rates as she pushed the case for President Joe Biden's $4 trillion budget, telling reporters in London over the weekend that "if we ended up with a slightly higher interest rate environment it would actually be a plus for society’s point of view and the Fed’s point of view.”

Rate traders seem less impressed, however, with the CME Group's FedWatch tool indicating only a 7% chance of a 2021 rate move, down from 10% a month ago.

In the meantime, with markets well past the first quarter earnings season, investors focus will likely shift towards government policy following the weekend agreement between G-7 finance ministers on a minimum corporate tax rate and Wednesday's opening debates in Congress over President Joe Biden's $1.7 trillion infrastructure bill.

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The G-7 agreement, while certainly historic, must also pass a series of domestic legislatures -- not to mention find approval among recalcitrant leaders of the G-20 -- before its has any impact on tech giants such as Apple, Google, Facebook and Amazon, and that process could take several years. 

Monday's impact looks muted at best, with futures contracts tied to the Nasdaq Composite index indicating a modest 25 point decline, buttressed in part by lower benchmark 10-year Treasury note yields, which slipped to 1.579% in overnight trading.

Contracts tied to the Dow Jones Industrial Average, meanwhile, are set for a 40 point gain while those linked to the S&P 500 are priced for a 1 point retreat at the start of trading. 

Tesla  (TSLA) - Get Report shares were marked 1.3% lower in pre-market trading following a weekend Tweet from founder and CEO Elon Musk that announced the cancellation of the carmaker's luxury 'Plaid+' sedan, while General Motors  (GM) - Get Report gained 0.43% on the strength of a $5 price target boost, to $70 per share, from Daiwa Capital Markets. 

Stocks were similarly muted in Europe and Asia today, as well, with both markets flitting in-and-out of positive territory to start the trading week, even after a much stronger-than-expected reading for China imports over the month of May, which rose 51.1% from last year thanks in part to the record high surge in a range of commodity prices. 

Oil prices, meanwhile, eased from multi-years highs as the dollar gained ground against its global currency peers and traders booked profits from last week's 5% surge.

WTI futures contracts for July delivery were marked 58 cents lower at $69.04 per barrel while Brent futures for August, the global benchmark, fell 64 cents to $71.25 per barrel.