What's Moving Markets: Retail Earnings, European Inflation, and EIA Inventories

More major US retailers announce profits, adding to the sentiments delivered by the retail sales data and Walmart on Tuesday (NYSE:WMT). The European Central Bank may raise its benchmark rate by 50 basis points in July, and the pound falls as inflation reaches a 40-year high, just as the UK looks to be on the brink of launching a trade war with the EU. Oil prices are rising again after another positive inventory report, and JPMorgan (NYSE:JPM) shareholders believe Jamie Dimon is already wealthy enough. On Wednesday, May 18th, here's everything you need to know about the financial markets.

1. Retail profits

On Tuesday, a shockingly high retail sales figure for April, along with a very dismal quarterly update from Walmart, focused attention on the oncoming assault of retail profits.

Target (NYSE:TGT) and TJX (NYSE:TJX) will report before the market opens, and they'll all be scrutinized for evidence of Walmart's pessimism. Given that competitor Home Depot (NYSE:HD) reported that the home renovation boom still has legs despite indicators that the housing market is softening, Lowe's (NYSE:LOW) has a higher bar to clear.

On that note, home starts and construction permits for April are due at 8:30 a.m. ET (1230 a.m. GMT), while weekly mortgage rate and application updates are due at 7 a.m.

2. The ECB's expectations have shifted.

Money markets upped their forecasts for ECB interest rate rises by the end of the year, keeping the euro over $1.05. After Dutch central banker Klaas Knot (a notable hawk) raised the likelihood of a 50 basis point rise in July on Tuesday, short-term interest rate futures now reflect expectations of a 100 basis point tightening from Frankfurt, the first time any ECB policymaker has indicated so.

On Wednesday, Bank of Finland Governor Olli Rehn said the ECB should lift its key rate above zero "quite fast," and that many ECB board members agree.

In April, the CPI for the Eurozone was revised down to 7.4 percent, while the rate of inflation excluding food and energy was affirmed at 3.9 percent. Car registrations in the EU plunged 20.6 percent year on year in April, highlighting the risks of hiking into a strong economic slump. They've lost 14.4% so far this year.

3. After a rise, stocks are expected to take a pause; JPMorgan shareholders reject Dimon's compensation plan.

The stock market in the United States is expected to begin a bit lower tomorrow, giving up some of the steep gains recorded on Tuesday as Federal Reserve Chair Jerome Powell declined to become even more hawkish in reaction to the retail sales data.

Dow Jones futures had down 86 points, or 0.3 percent, at 6:30 a.m. ET, while S&P 500 futures had fallen 0.4 percent.

In addition to retailers, Analog Devices (NASDAQ:ADI) and Experian (OTC:EXPGF) are among the corporations posting profits after hours, with Cisco (NASDAQ:CSCO) being the largest.

Twitter (NYSE:TWTR) (again), after it said it intends to hold Elon Musk to his legal commitments regarding the leveraged buyout offer of $54.20 a share, and JPMorgan (NYSE:JPM) (again), after shareholders passed a non-binding motion rejecting CEO Jamie Dimon's bumper pay package awarded last year, are likely to be in focus.

4. Sterling is under pressure as UK inflation rises and Brexit anxieties resurface.

The pound weakened once again as a 40-year high in inflation mixed with renewed worries of a trade war with the EU threw additional doubt on the UK's economic prospects.

Due to a rise in VAT and regulated family energy rates, the increase in inflation to 9.0 percent was generally predicted. After the UK government publicly revealed its desire to make unilateral modifications to protocols in the Brexit agreement, there is growing worry that the EU could impose tariffs on UK imports and limit access to the single market for vital services industries, notably banking. The United Kingdom aims to eliminate customs inspections on goods traveling between the United Kingdom and Northern Ireland.

The pound was down 0.6 percent versus the dollar at $1.2413 at 6:30 a.m. ET.

5. Oil prices rise as API crude inventories fall.

Crude oil prices climbed once further after the American Petroleum Institute released an unexpectedly strong report indicating continued robust oil demand despite record high gasoline and diesel prices. Data from the government is expected at 10:30 a.m. ET.

After being pushed out of the capital Tripoli by warring groups, Libya's parliament-elected Prime Minister decamped to the town of Sirte, raising geopolitical dangers once again. This opens the door to further interruptions in supplies from the crucial North African supplier, who is not bound by the OPEC+ quota deal.

Treasury Secretary Janet Yellen's suggestion that the EU apply taxes on Russian oil instead of an embargo seems to have had little effect on market tensions.

By 6:40 a.m. ET, US oil prices were up 1.3 percent to $111.06 a barrel, while Brent crude futures were up 1.0 percent to $113.09 a barrel.