HL commentary as it happens

Jobless claims and PPI in focus today

Later today, there are a couple of data points that could further influence the tug of war between borrowing costs, price rises and interest rates. Continuing jobless claims are expected to remain broadly flat at about 1.78 million, which is relatively low compared to historical norms. Last week’s non-farm payrolls numbers pointed to structural pockets of hiring strength in sectors such as healthcare, and a bump in leisure and hospitality job creation ahead of the FIFA World Cup, which kicks off today. However, this is being offset by hiring freezes and limited job cuts in other sectors.

The bigger mover of today’s market could be the US Producer Prices Index, which can be loosely seen as a forward indicator of the direction of consumer prices. The year-on-year print is expected to rise from 6.0% to 6.4%, although forecasts suggest the pace of change is slowing, with the monthly change expected to decelerate from 1.4% to 0.7%. With markets already twitchy, a meaningful surprise on either side is likely to see an amplified reaction.

US CPI in line with core a little softer than expected

US stocks suffered a bruising session yesterday as investors winced at the highest headline CPI inflation numbers in three years, and a throwaway “I love inflation” comment by President Trump. The 4.2% annual increase was driven by a 23.5% rise in energy. Beneath the surface, however, core inflation was more muted at 2.9%. The monthly rise of 0.2% came in a little cooler than forecasts of 0.3%. Taken together with last week’s bumper non-farm payrolls data, there are some signs that the economy can accommodate a higher level of hiring without running red hot. Bond markets took a sanguine view with US 10-year yields broadly flat at 4.5%.

Brent crude back below $94 per barrel

The FTSE 100 has opened up, shrugging off weak sessions on Wall Street and in the Far East. Despite fresh strikes by US and Iranian forces in the Persian Gulf overnight, Brent Crude oil, which has traded as high as $96 per barrel in the last 24 hours, is now back below $94 as Washington and Tehran contradict each other on the status of the Strait of Hormuz.

Oil flat at around $88 a barrel despite US and Iran exchanging fire

From the Fed’s perspective, the good news is that WTI remains relatively flat at $88 a barrel despite the US and Iran exchanging fire overnight after the downing of an American helicopter overnight. That’s towards the lower end of where oil prices have been since the war in Iran started.

US stock market set to open flat

The US stock market looks set to open broadly flat today, with S&P futures down 0.3%. The US recovered a lot of lost ground on Tuesday afternoon, having fallen around 3% in the morning.

US inflation numbers later today

US May inflation data is due out later today, with economists expecting both core and headline inflation to tick up. Consensus is for headline CPI inflation to reach 4.2%, which would be the highest it’s been since April 2023, and following on from strong jobs data would put more pressure on the Fed to think about raising interest rates. The US central bank is stuck between a rock and a hard place, with the President likely to take a dim view of rate rises, but higher oil prices are steadily pushing up prices across the economy.

UK retail sales rebound strongly

UK retail sales rose 3.7% year-on-year on a like-for-like basis in May, comfortably beating expectations of a modest 0.6% increase and marking the strongest growth since April 2025. The rebound follows a sharp 3.4% decline in April, with spending boosted by warm weather and early bank holiday activity. Food sales climbed 3.9%, helped by barbecue demand over the holiday period, while non-food categories, including clothing, outdoor goods, and home products were up 3.5% as consumers leaned into summer spending. However, the picture wasn’t uniformly strong. Travel spending fell 5.8% for a third straight month, with airline expenditure down 12.9%, pointing to continued pressure on discretionary big-ticket spending. Barclays noted that around two-thirds of consumers are adjusting their finances amid broader economic uncertainty, with concerns ranging from rising living costs to geopolitical tensions.

FTSE opens down 0.4%

The FTSE 100 has opened down 0.4%. While US markets staged a partial recovery overnight, investors remain cautious after the sharp selloff at the start of the week. The mood is one of tentative stabilisation rather than outright confidence, with attention still firmly on the outlook for AI valuations and interest rate expectations.

US treasury yields at 2-week high on signs of US labour market breakout

US 10-year treasuries are nudging 4.6% today following a blowout jobs report on Friday. Nonfarm payroll increases of 172,000 came in 100% above analyst expectations, raising fears that the US economy is overheating. That’s certainly the view debt markets have taken, with yields adding around 0.2 percentage points since the report broke and odds moving in favour of a quarter-point rate hike from the Fed by October. However, there are some signs that the current strength in hiring is more structural than cyclical. The beat wasn’t accompanied by an acceleration in wage growth.

Furthermore, both labour market participation and unemployment were flat at 61.8% and 4.3% respectively, suggesting that at least some of Friday’s beat came from supply constraints rather than excess demand. Much of the strength came from local government and health care, both sectors which have been considered under-staffed for some time, with the latter also seeking to fill a skills shortage. Neither sector is typically driven by credit-fuelled consumer enthusiasm. The same can’t be said for leisure and hospitality, which saw the biggest hiring spree last month. In this case however, the imminent kick-off of the FIFA World Cup on Thursday is likely to be a key driver. Longer term, the bull hypothesis is that productivity gains from AI can support job growth. While bots may step into some roles, increased productivity, faster workflows, and new products and services could drive underlying improvements in the labour market.

Oil prices spike as Middle East crisis enters 100th day

Brent crude oil prices have reversed most of last week's falls, rising nearly 5% to over $97 per barrel. The Iran crisis has entered its 100th day, and despite President Trump’s continued insistence that a deal to end the conflict and reopen oil transit routes is close, the weekend saw heavy exchanges of fire between Israel, Iran and Iranian proxy Hezbollah in Lebanon, as well as Iranian strikes against Kurdish targets in Iraq.

FTSE 100 opens down

The FTSE 100 has opened down 0.3% to 10,333 points, mirroring weakness in overseas equity markets, which have been weighed down by fears of higher interest rates and an escalation of tensions in the Middle East.