Macroeconomics: The Day Ahead for 1 June 2026

While the US/Iran negotiations remain centre stage, money flows are clearly assuming an eventual successful outcome that will bring energy prices down, thus easing central bank rate hike pressures, and return the market focus to the AI investment boom. This overlooks a multitude of supply chain, political and other economic challenges, but one could argue that the run of Manufacturing PMIs from Asia overnight does demonstrate a good deal of resilience in the manufacturing sector, despite energy price pressures. However, a deeper analysis would have to acknowledge that raw materials and above all energy price pressures would have already been a lot worse, were it not for the large drawdown of inventories (above all in China and the US). These stocks are in many cases now at critical levels, as but one example US Gasoline inventories are at their lowest level since 2014 in seasonal terms (i.e. going into the driving season), and it should also be remembered that hedges against price spikes are gradually rolling off, with high volatility raising hedging costs, and by extension reducing forward hedging volumes. The bigger picture problem is that the investment boom is already exercising upward pressures on a large volume of resources and components (above all processor and memory chip prices), and restoring output and transport of energy and other products/resources from the Persian Gulf to pre-war levels will take many months (probably lasting until the end of the year), and power grids/generation are very simply not capable of delivering the  sort of output that will be needed. The point is that it should not be forgotten that the world is fracturing in trade terms, upstream investment has been too low for a decade, above all to meet the sort of demand that AI and energy transition implies, and innovations and efficiencies will take years to evolve – per se an inflationary backdrop remains in place, even if current supply disruptions are resolved.

USA: JOLTS Job Openings have been very volatile over the past year, and subject to often major revisions, the April reading is seen barely changed at 6.857 Mln, still well above December’s 6.550 Mln low, and well below January’s 7.240 Mln high – which to be honest suggests that this measure is not really very helpful in forming a picture of labour demand. Wednesday’s ADP Employment is forecast to be little changed at 118K, while Friday’s headline and Private Payrolls are expected to post a solid if unspectacular 89K rise, with the Unemployment Rate unchanged at 4.3%, and Average Hourly Earnings edging up to 0.3% m/m but easing to 3.4% from 3.6% in y/y terms. Wednesday’s Beige Book will likely continue to paint a mixed, though generally positive picture of economic activity, with labour demand still ‘steady to up’. The focal point will be prices which in April were described pressures as “moderate overall, with the vast majority of Districts reporting moderate increases and others pointing to modest growth. Generally, input cost increases outpaced selling price growth, compressing margins. Energy and fuel costs rose sharply in all Districts, attributed to the Middle East conflict, leading to higher freight and shipping costs and higher prices for plastics, fertilizers, and other petroleum-based products. Input cost pressures beyond energy-related increases were also widespread.” Margin compression will remain, the question is whether price pressures continued to be described as “moderate overall” or accelerating. Auto Sales are seen little changed and erring on the side of sluggish at 16.0 Mln.

Eurozone: ECB speakers are largely signalling that rates will need to rise in June, per se rendering Monday’s ECB Consumer Inflation Expectations (median for 1-yr 4.1% from 4.0%, 3-yr unchanged at 3.0%), and Tuesday’s CPI (median headline 0.1% m/m, 3.2% y/y from 3.0%, and core 2.4% y/y from 2.3%) somewhat academic, though certainly justifying a hike. The real question is how the ECB will guide markets in terms of further hikes, which they will not pre-commit to, given the high level of uncertainty about the Middle East. But they will likely temper a commitment to keep inflation under control, by emphasizing the downside risks to growth, and perhaps suggest that knock on effects to wages may be more muted than was the case in the post pandemic ‘boom’.

Elsewhere, Japan’s Capital Spending is expected to slow to 4.0% y/y with the ex-Software measure seen up 5.4% y/y, though this median forecast is largely an extrapolation from provisional Q1 GDP, and Q1 earnings imply upside risks, which would also see Q1 GDP revised up. Labour Cash Earnings for April are expected to remain robust at 3.2% y/y and in real terms at 1.7% y/y, further bolstering the case for a June rate hike, though Household Spending is seen remaining in negative territory at -1.5% y/y, though better than March’s -2.9% y/y. India’s Q1 GDP is forecast to slow to 7.0% y/y from Q4’s 7.8%, Trade is likely to have been a net drag on the economy, given that high US tariffs were in place until the end of February, and then the energy price shock and disruption to shipping and industrial output in March. Domestic demand above all from a strong harvest and sales tax cuts should have provided a considerable offset, but stronger headwinds are likely in Q2. A close eye needs to be kept on CPI readings from Indonesia, Philippines and Thailand, which will to a large extent dictate the path higher for rates, as well for beleaguered local currencies.

There are 12 S&P 500 companies reporting this week, with worldwide corporate earnings highlights as compiled by Bloomberg News likely to include: Broadcom, Ciena, Credo Technology Group, Crowdstrike, HP Enterprise, Industria de Diseno Textil aka Inditex, Medtronic, Meituan, Palo Alto Networks, Veeva Systems.