By Geoffrey Smith
Investing.com -- The U.S. administration is getting more creative in finding ways to bring down inflation before the midterm elections. China is easing up on its tech giants, but its service sector remains deep in contraction in May. U.K. Prime Minister Boris Johnson faces a revolt from his own party lawmakers, and oil prices rise after Saudi Arabia indicates the market is going to stay tight in July whatever OPEC+ says or does. Here's what you need to know in financial markets on Monday, June 6.
1. Desperate Dems
The administration of U.S. President Joe Biden is showing itself ever readier to take politically controversial steps to reduce inflation ahead of the midterm elections in November.
Commerce Secretary Gina Raimondo told CNN that the administration is looking at removing some of the tariffs on Chinese imports imposed by Donald Trump during his presidency. She said that the move would reduce price pressures for household goods but added that tariffs on steel and aluminum would remain in place.
Elsewhere, Reuters reported that the administration is prepared to give Spain’s Repsol (BME:REP) and Italy’s Eni (BIT:ENI) waivers from the sanctions on Venezuela, allowing them to ship Venezuelan crude oil to Europe to alleviate its fuel shortage. That may in turn reduce – if only marginally – European demand for U.S. crude and refined products that is contributing to the squeeze on domestic gasoline prices.
2. China relents on Didi, others
China’s regulators are set to end their probe into the cybersecurity practices of Didi Global (NYSE:DIDI) and two other U.S.-listed Chinese companies, according to The Wall Street Journal. If confirmed, that would be the first tangible relaxation of government pressure on the technology sector in a year.
The news came too late to help Chinese stock indices but lifted the offshore yuan by around 0.2% against the dollar. The yuan was also supported by reports that Beijing is preparing to lift its COVID-19 restrictions after a steady decline in cases.
China’s services sector has been ravaged by lockdowns in Beijing, Shanghai, and elsewhere in recent months. The Caixin Services purchasing managers index, a bellwether of services activity, remained deeply in contractionary territory in May at 41.4, albeit that was a rebound from a two-year low of 36.2 in April.
Didi ADRs, meanwhile, jumped over 50% in premarket but are still more than 80% below their listing price from last year.
3. Stocks set to open higher, building on jobs report
U.S. stock markets are set to open higher, extending gains after Friday’s labor market report that suggested ongoing strength in job creation without any further acceleration in wage growth. As such, the report - for once – lacked any fresh evidence for tightening monetary policy faster than already planned. The Conference Board’s employment trends survey adds a coda to that at 10 AM ET.
By 6:30 AM ET, Dow Jones futures were up 270 points, or 0.8%, while S&P 500 futures were up 1.0% and Nasdaq 100 futures were up 1.5%.
Stocks likely to be in focus include Tesla (NASDAQ:TSLA), after Elon Musk tried to limit the damage done by a report suggesting large-scale layoffs at the electric vehicle maker on Friday.
4. Johnson faces no-confidence vote
U.K. Prime Minister Boris Johnson is to face a vote of no-confidence from his party’s lawmakers later Monday, after enough backbench Members of Parliament demanded the move.
The development comes only a couple of weeks after a damning report into illegal parties at 10 Downing Street that violated the lockdown rules under which the rest of the country was living at the time. The affair has badly dented the Conservatives’ support in opinion polls and contributed to heavy defeats in local elections last month.
Sterling was little changed on the news, rising 0.4% against the dollar amid speculation that the Bank of England will have to tighten monetary policy more than it guided for at its last meeting.
5. Oil higher as Saudi lifts OSPs for July
Crude oil prices touched $120 a barrel again as Saudi Arabia, the world’s largest producer, raised official selling prices for its July crude shipments by more than had been expected.
The move was taken as a sign that supply remains extremely tight, despite the commitment by the OPEC+ group of producers to quicken the planned pace of output increases from next month. OPEC+ has agreed in principle to lift its output by 632,000 barrels a day from July, but that will depend largely on the ability of Russia’s oil sector to cope with a gradually tightening western sanctions regime.
By 6:25 AM ET, U.S. crude prices were up 0.7% at $119.75 a barrel, while Brent prices were up 0.7% at $120.56 a barrel.