In London the FTSE 100 is higher on the day as investors keep one eye on the political landscape in the UK. 

Traders are optimistic that the Conservatives will do a deal with the Democratic Unionist Party (DUP). Talks between the two parties started yesterday, and as they are on the same page on a lot of topics, I would imagine a pact can be reached.

The Tories are hoping to form a minority government with the supply and confidence of the DUP. Investors want a deal to be struck sooner rather than later, as it will help to end some of the ongoing political uncertainty.

In other news, Bellway shares are up over 4% after the homebuilder issued a positive trading update. The board of directors are still cautious about Brexit negations, but the order book is higher on the year, and it is well ahead of their original target.

The UK average earnings index for the three months excluding bonuses for April came in at 1.7%, and that compares with the consensus of 2%. The prior month’s reading was 2.1%. GBP/USD ticked lower after the announcement, but considering how poor the earnings figures were, it was a fairly muted reaction. Weak wage growth and rising inflation will put the Bank of England in a tricky position.

The International Monetary Fund (IMF) raised its growth forecast for China for the second time this year. The IMF anticipates growth to be 6.7%, and that compares with the 6.6% forecast in April, and the 6.5% estimate in January. Overnight, China announced industrial production figures that slightly exceeded estimates, and the retail sales report came in a touch under the forecast.

In the US, we are expecting the Dow Jones to open 18 points higher at 21,346 and the S&P 500 to open at 2441, up 1 point. Traders will be focused on the US inflation report at 1.30pm, and Federal Reserve meeting at 7pm (both London time). The Fed are expected to raise interest rates, but some investors feel the rate hike could be accompanied by dovish language.


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