By Jamie McGeever
ORLANDO, Florida, May 13 (Reuters) - Investors shrugged off a sharp rise in U.S. producer inflation and spike in bond yields on Wednesday to push the S&P 500 and Nasdaq to new highs, as they awaited the U.S.-China summit in Beijing between Presidents Donald Trump and Xi Jinping.
In my column today, I look at how Trump's hand going into the summit is weaker than it was the last time the two leaders met in October, thanks to the Iran war and wave of inflation it has unleashed.
If you
have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.
1. US producer prices surprise with largest increase in four years
2. G7 long bond stress intensifies: Mike Dolan
3. Warsh clinches Senate approval to be Fed's next chair as inflation intensifies
4. To dot or not? Warsh's first Fed rate projection could out his views to the public - and Trump
5. Roundhill fund becomes fastest-growing ETF ever as retail investors seek semiconductor exposure
Today's Key Market Moves
• STOCKS: Solid gains in Asia - KOSPI +3%, Japan +1%. Europe+1%, UK +0.5%. Nasdaq +1.2%, S&P 500 +0.6%.
• SECTORS/SHARES: Six sectors in the S&P 500 rise, five fall. Tech +1%, comms services +2.7%, energy -0.9%. Ford +13%, Micron Technology +5%.
• FX: Dollar rises again, Brazil real -2%, biggest fall this year, on govt fuel subsidies.
• BONDS: U.S. yields end little changed. 30-year U.S. auction is weak - high yield paid, very low bid/cover.
• COMMODITIES/METALS: Oil down, Brent -1.7%. Gold -0.5%.
Today's Talking Points
* PPIping hot
U.S. producer price inflation surged in April, notching the biggest monthly and annual gains since 2022, and rising much faster than analysts expected. If PPI is a precursor of CPI, the signs are ominous - consumer inflation will soon be smashing through the 4% barrier.
The difference between annual PPI and CPI inflation rates in April jumped to 2.2 percentage points, the widest gap since 2022. The gap between the monthly measures was 0.8 percentage point, matching the highest since 2010. Buckle up.
* Reaching the summit
The countdown to the Xi-Trump summit in Beijing is almost over. The two leaders are expected to discuss Iran, Taiwan, trade, energy and tech security, with expectations of major breakthroughs on any of these issues being set pretty low.
Trump's entourage includes more than a dozen leading figures from the business world, including Elon Musk, Apple CEO Tim Cook and, at the last minute, Nvidia CEO Jensen Huang. Could this be a sign of a potential agreement on Nvidia selling its powerful H200 AI chips to customers in China?
* Confirmation
Kevin Warsh is chair of the Federal Reserve. He replaces Jerome Powell, whose term ends on Friday but who will remain a Fed governor. Fed Governor Stephen Miran, currently the central bank's biggest advocate of rate cuts, will vacate his spot on the board to make room for Warsh.
He has a job on his hands convincing his colleagues that rates should be cut. Headline consumer and producer inflation is the highest in years and rising, and some of the 'trimmed mean' measures - favored by Warsh - are moving higher too.
What could move markets tomorrow?
• Developments in the Middle East
• Energy market moves
• U.S.-China summit in Beijing between Presidents Donald Trump and Xi Jinping
• Japan earnings including Bridgestone, Honda and Rakuten
• Bank of Japan board member Kazuyuki Masu speaks
• Bank of England chief economist Huw Pill speaks
• UK trade (April)
• UK industrial production (March)
• UK GDP (Q1, prelim)
• U.S. weekly jobless claims
• U.S. retail sales (April)
• U.S. import prices (April)
• U.S. Federal Reserve officials scheduled to speak include Kansas City Fed President Jeffrey Schmid, Cleveland Fed President Beth Hammack, New York Fed President John Williams and Governor Michael Barr
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
(Reporting by Jamie McGeever;)
