Stock futures slip ahead of key inflation report: Live updates

Reuters reported on Wednesday that U.S. prosecutors are taking a look at short selling in bank shares.

The trading activity around the regional banking crisis is an “area of interest” for the Justice Department, a person familiar with the matter told Reuters. The department is looking for potential market manipulation. Steep drops for some stocks this month after banks reported rebounded deposits led to speculation that short-sellers were having a large impact on the market.

During the global financial crisis, regulators briefly banned short-selling on bank stocks. However, Treasury Secretary Janet Yellen told CNBC on Monday that the bar was high to implement another short-selling ban, which would be under the authority of the Securities and Exchange Commission.

—Jesse Pound

The latest reading on the U.S. consumer price index is slated for release Wednesday, with economists polled by Dow Jones expecting a year-over-year gain of 5% for April.

JPMorgan’s sales and trading team broke down five possible scenarios for how the stock market might react. Here’s two of them:

• 50% chance — CPI between 5% and 5.2%: This is the most-likely scenario, per JPMorgan, and will give “comfort that disinflation can continue but this is not enough to reprice yields higher.” The S&P 500 would rise between 0.5% and 0.75% under this outcome, JPMorgan expects.
• 25% chance — CPI between 5.3% and 5.5%: “This scenario would be a shock to the markets, but it seems unlikely that we experience a significant sell off since the spike in yields is likely muted given the bond market’s fears surrounding bank contagion and the debt ceiling,” JPMorgan said. The S&P 500 would lose 0.75%-1.25% under this outcome, the traders said.

— Fred Imbert

European markets opened muted as investors look ahead to the latest U.S. inflation data and how it could affect the U.S. Federal Reserve’s monetary policy.

The pan-European Stoxx 600 index was up 0.1% around market open, led by a 0.9% uptick in bank stocks. Sectors were a mix of gains and losses, with health care down 0.4%.

— Hannah Ward-Glenton

China’s inflation for April is expected to fall further to 0.3%, according to a Reuters poll of 37 economists. The country will release its consumer price index Thursday.

Should the forecast prove accurate, that would mark the third-straight month of decline in the inflation rate, and the lowest reading since February 2021, when inflation was at -0.2%.

China’s inflation stood at 0.7% in March after coming down from a peak of 2.1% in January.

— Lim Hui Jie

South Korea’s ministry for small- and medium-sized enterprises and startups is pushing a few measures to uplift the country’s declining venture capital sector.

In an exclusive interview with CNBC, Lee Young, South Korea’s minister for SMEs and startups, said the measures include injecting 1 trillion Korean won ($748.43 million) into a government-owned fund, which it estimates will create 2 trillion won in venture capital investments.

Venture capital investment in South Korea plummeted 60.3% during the first quarter compared with a year ago, ministry data showed. The ministry attributed the decline to factors such as a slowdown in the economy and high interest rates which resulted in more expensive capital.

“Secondly, we will provide comprehensive support for fundraising of innovative startups. And we are offering lots of incentive programs to private capital to move actively in this difficult situation,” Lee told CNBC’s Chery Kang.

“Finally, we have continuously tried to make a joint global fund. For example, President Yoon visited New York last year to discuss the making of a joint fund. And now we are talking with the Saudi Arabia government. And I’m confident that we will announce this soon,” said Lee.

Saudi Arabia has been making a series of investments into South Korean firms such as Kakao and petrochemicals companies.

— Sheila Chiang

The Australian government should not rest on its laurels and instead work to improve the structural position of the budget in the medium term, according to Andrew McKellar, chief executive of the Australian Chamber of Commerce and Industry.

“If you look at what’s projected at the moment: within two years, we are projected to be back into a deficit of $35 billion a year, so that needs to be further addressed,” ACCI chief executive McKellar told CNBC in a Wednesday interview.

Late Tuesday, Treasurer Jim Chalmers announced billions in cost-of-living relief aimed at lowering power bills and consumer prices, with defense and ties with neighboring Pacific nations another priority as Australia looks to counter China’s growing strategic influence in the region, Reuters reported.

In various interviews with Australian media on Wednesday morning, Chalmers and Prime Minister Anthony Albanese rejected concerns that the budget will end up worsening inflation.

Chalmers expects domestic growth to slow to just 1.25% in 2023/24 from 3.25% this fiscal year, in large part due to the 375-basis-points of rate rises from the Reserve Bank of Australia.

“Our assessment is that it is time to pause,” said ACCI chief executive McKellar. “The real test for the success of the budget: will it be seen by the Reserve Bank to take the risk off inflation. If we do see further interest rate increases in the coming months, we may see monetary and fiscal policy potentially pushing against each other. That is a situation we want to avoid.”

— Clement Tan

Korean Air CEO Walter Cho expects a full recovery by the third quarter. The airline has doubled in operating profit compared with 2019, he told CNBC’s “Squawk Box Asia.”

Passenger demand is “very strong right now” and the airline has reached about 90% capacity in passenger traffic, Cho added.

Korean Air is seeing “very strong” demand from China but, Cho said, it is only at about 30% capacity currently. Cho said the airline expects capacity to open up fully by the second half of the third quarter.

Japan has shown strong traffic from the fourth quarter of last year and the first quarter of this year, which the airline expects will continue “all throughout this year,” Cho said.

– Audrey Wan

Japanese conglomerate Mitsubishi Corp posted a record net profit of 1.18 trillion yen ($8.72 billion) for its financial year ended March, the first time net profit has crossed the 1 trillion mark.

The 1.18 trillion yen figure was 25.94% higher compared with the 2021 fiscal year, which saw a net profit of 937.5 billion yen. The earnings were led by gains in the natural gas, industrial materials and real estate segments.

However, the company said that net income for the current financial year will most likely come in lower at 920 billion yen due to high market prices for resources.

Mitsubishi also announced additional share buybacks of 200 billion yen for its 2022 fiscal year, bringing its total amount of buybacks to 370 billion yen. The company estimates 100 billion yen in share buybacks for its current fiscal year.

Shares of Mitsubishi surged 4.04% on Wednesday and was the top gainer on the Topix in terms of index points.

— Lim Hui Jie

President Joe Biden and Democratic leaders, as well as Republican Senate Majority Leader Mitch McConnell, all pledged that the United States will not default on its debt after a high stakes meeting at the White House.

“I made clear during the meeting that default is not an option,” Biden said at a hastily called press conference.

“The United States has never defaulted on its debt and it never will,” said McConnell, who attended the meeting with GOP House Speaker Kevin McCarthy, Calif., Democratic Senate Majority Leader Chuck Schumer and House Minority Leader Hakeem Jeffries, both of New York.

Schumer said that McCarthy was the only attendee at the meeting who would not rule out a debt default. “We explicitly asked speaker McCarthy would he take default off the table. He refused,” Schumer said.

For his part, McCarthy told reporters he did not see “any new movement” in negotiating positions. “Everybody in this meeting reiterated the positions they were at,” he said.

Despite making little progress, the leaders will reconvene on Friday. In the interim, Biden said, their aides will meet every day.

— Christina Wikie

Airbnb shares lost 11% in extended trading after sharing soft guidance for the current quarter.

Despite the after-hours losses, Airbnb reported first-quarter earnings that beat analyst estimates on both the top and bottom lines.

Looking ahead, the company warned of tough comparables in the second quarter. Last year, the company benefited during the period from pent-up demand for travel following an omicron surge.

For the current period, Airbnb said it expects a decline in bookings growth and average daily rates from a year ago.

— Samantha Subin, Ashley Capoot

These are some of the names making the biggest moves after the bell:

Twilio — Twilio shares shed nearly 14% after providing a lighter-than-expected forecast for the current quarter. The company posted a slight beat on revenue.

Rivian — The electric vehicle stock gained more than 5% in extended trading. Rivian reported a narrower-than-expected loss and revenue beat Wall Street’s expectations. The company also reaffirmed its EV production target.

Affirm — Shares of the buy-now-pay-later company fell more than 9% despite better-than-expected revenue. Losses for the quarter tripled from last year, but were narrower than expected.

— Samantha Subin