Early Morning Call: UK unemployment rate unexpectedly falls in April; wages rise more than expected

APAC overview

APAC equity markets rose on Tuesday, following the lead of European and US indices. In Japan, Nikkei 225 rallied to a new 33-year high, helped by SoftBank on the news it may team up on an AI venture with OpenAI. Toyota also rose by nearly 5%.

In Australia, two surveys released overnight reflect the effects of the Reserve Bank of Australia (RBA) tightening policy. Australian consumers are increasingly worried about the consequence high interest rates could have on employment prospects.

Westpac-Melbourne consumer sentiment remained well below 100 in June, at 79.2, suggesting pessimists greatly outnumbered optimists. But what the survey also revealed is the difference in reading before and after the RBA decision last week. Before the 25-basis point hike, confidence survey came in at 89. After the decision it dropped to 72.6. The survey also showed that unemployment expectations rose 6.6%.

The other is National Australia Bank (NAB) business confidence, also showing worries around employment. Australia's business sentiment unexpectedly fell to -4 in May, when the market expected the index to remain at 0. A negative number means that there were more pessimistic opinions that optimistic ones. The survey's measure of sales declined eight points to +14 in May, the employment index fell seven points to +4.

In China, the People's Bank of China (PBoC) lowered a short-term lending rate overnight. The seven-day reverse repo rate was cut by 10 basis points to 1.90%. The cut to the lending rate signals possible easing for longer-term rates. One-year and five-year Loan Prime Rates, used respectively to set consumer loan and mortgage rates, could be lowered by the same margin next Tuesday. They currently point at 3.65% and 4.3%.

UK unemployment

The UK unemployment rate unexpectedly fell to 3.8% in April. The number of people claiming for unemployment benefits fell by 13,600 in May.

At 10am, Germany ZEW economic sentiment is expected to fall to -12.7 in June, from -10.7 in May.

Ahead of the Federal Reserve (Fed) decision, the market is getting ready for the latest US inflation data. The consumer price index (CPI) is expected to fall to 4.1% year-on-year (YoY), following a 4.9% rise the previous month. This would be the weakest CPI growth since March 2021.

But more than headline CPI, the focus will be on core CPI. It is forecast to fall too, but not as much, to 5.3% YoY, from 5.5% in April. Since March, the headline CPI figure points below the core CPI. Energy prices have substantially fallen, but broad-based inflation seems to be stickier than thought.

Equites overview

Oracle shares stormed to a record high last night after the company smashed earnings expectations. Adjusted earnings came in at $1.67 per share. Revenue rose by a whopping 17% to $13.84 billion. The company's top source of revenue, cloud services and license support, jumped 23% to $9.37Bln. Revenue from cloud infrastructure climbed an eye-watering 76% to $1.4Bln.