A look at the day ahead in U.S. and global markets from Mike

Dolan

Wall Street looks set to end the shortened week slightly punch

drunk, with Friday's May inflation update set to be a decider

after a slew of conflicting economic data signals and the latest

election twist.

The Federal Reserve's favored PCE inflation gauge is due out

early on Friday. Consensus forecasts for a 0.3% monthly increase

in the core measure and annual rate stuck at 2.8% are still

likely too high for Fed officials to give a green light on

easing interest rates.

Still, a rough week for bonds calmed down a bit on Thursday

after news that U.S. first quarter GDP and inflation readings

were revised down a touch, home sales plunged in April and

jobless claims ticked higher.

The latest sweep of Fed speakers also sounded more sanguine

about the hopes for continued disinflation.

Without signalling any urgency in cutting rates, New York

Fed boss John Williams said rates would be cut "at some point".

Dallas Fed chief Lorie Logan reiterated that it was still "too

soon" to be thinking about easing.

However, the better bond market mood did little to lift

stocks. The S&P500 lost 0.6% on Thursday and, dragged

down by a near 20% post-earnings swoon in Salesforce ( CRM )

shares, the Nasdaq lost more than 1%.

Futures stayed in the red before Friday's bell and the VIX

volatility index stayed elevated at about 14.5.

There was no obvious market reaction to the potentially

seismic political news overnight that Donald Trump became the

first U.S. president to be convicted of a crime. A New York jury

found him guilty of falsifying documents to cover up a payment

to silence a porn star ahead of the 2016 election.

Although polling shows most voters see the conviction as

'serious', markets seem wary of reading any implications for

November's presidential election race - not least because they

have yet to fix on what a Trump return to the White House would

mean for asset markets and economy anyhow.

And much has yet to play out in terms of sentencing, appeals

and what it means for Trump's candidacy within the Republican

party. Even in the unlikely event he faced prison, he would

still not be constitutionally barred from becoming president.

Overseas markets remained in thrall to the U.S. inflation

and Fed picture for the most part.

The dollar was steady for the most part, although the euro

nudged higher after euro zone May inflation came in

slightly above forecasts - even if still below 3%.

While the update is unlikely to cut across the European

Central Bank's expected quarter-point interest rate cut next

week, full-year ECB easing expectations slipped back further to

55 basis points.

Euro zone bond markets now look ahead to sovereign credit

rating reviews for Italy, France, Greece and Ireland later on

Friday.

China's manufacturing activity unexpectedly fell in May,

keeping alive calls for fresh stimulus as a protracted property

crisis in the world's second-largest economy continues to weigh

on business, consumer and investor confidence.

Elsewhere, South Africa's rand fell to a five-week

low as results from this week's election showed the African

National Congress had fallen short of a majority - setting up an

uncertain period of coalition building ahead.

Mexico's peso was also on the backfoot ahead of the

weekend presidential elections there.

Oil prices held steady ahead of Sunday's OPEC+

meeting, with the producer group working on a complex deal that

would allow it to extend some of its deep oil production cuts

into 2025.

In other news, the Wall Street Journal reported that Bill

Ackman is considering selling a stake his Pershing Square firm

that would value the company at about $10.5 billion.

Key diary items that may provide direction to U.S. markets later

on Friday:

* US April personal income and consumption and 'core' PCE

inflation readings for the month, Chicago May business survey;

Canada Q1 GDP revision

* Atlanta Federal Reserve President Raphael Bostic speaks

(By Mike Dolan, editing by Gareth Jones

[email protected])