Highlights
U.S. equities finished a turbulent week in positive territory as easing concerns over Middle East tensions, falling oil prices, and continued investor interest in sectors beyond large-cap technology helped support markets. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite posted gains of 0.68%, 0.65% and 2.34% respectively. Value stocks continued to outperform growth stocks for a second consecutive week. Geopolitical developments remained a key market driver. Investors initially looked beyond missile exchanges between Iran and Israel, but concerns resurfaced after reports of renewed U.S.-Iran hostilities. Sentiment improved later in the week as optimism grew around a potential diplomatic agreement between the two countries, further supported by President Donald Trump’s decision to cancel planned military strikes. Another major focus was the highly anticipated IPO of aerospace company SpaceX, which completed what became the largest public offering ever recorded. SpaceX debuted on the Nasdaq at $150 per share, above its $135 IPO price, and surged more than 20% intraday before closing 19% higher at $160.95. The strong performance fuelled broader market enthusiasm, with investors rotating into growth and technology names viewed as relatively undervalued. On the macro front, consumer inflation accelerated in May to 4.2% year over year, the highest level since April 2023, largely due to surging energy prices. However, monthly inflation slowed to 0.5% from 0.6% in April, marking a second consecutive month of easing price growth. Core inflation, which excludes food and energy, also cooled to 0.2% from 0.4% the previous month. Producer prices showed a similar trend. The Producer Price Index increased 6.5% from a year earlier, up from 5.7% in April and reaching its highest level since late 2022. Across the Atlantic, European equities ended the week higher, with the pan European Euro STOXX 600 Index rising 2.10%. Markets were initially cautious ahead of the European Central Bank’s policy decision and ongoing geopolitical tensions, but sentiment improved as hopes for a peace agreement in the Middle East strengthened. Meanwhile, the ECB raised three key interest rates, marking its first rate hike since September 2023. Policymakers acknowledged heightened uncertainty, balancing stronger inflation risks against weaker growth prospects. The central bank now expects eurozone inflation to average 3.0% in 2026, 2.3% in 2027, and 2.0% in 2028. At the same time, it lowered GDP growth forecasts to 0.8% for 2026 and 1.2% for 2027. In the UK, GDP contracted 0.1% in April following growth in March. Weakness in services weighed on activity, increasing expectations that the Bank of England may leave rates unchanged at its upcoming meeting. Moving along to Asia, Japanese stocks experienced a volatile week, with the Nikkei 225 falling 0.85% and the TOPIX declining 1.70%. However, losses were partly reversed at week’s end after hopes for a U.S.-Iran peace agreement improved investor sentiment and reduced concerns about disruptions to shipping through the Strait of Hormuz. Attention centered on the Bank of Japan’s June policy meeting, where markets widely expect a 25-basis-point rate increase to 1.0%, the first hike since December 2025. Separately, Chinese markets delivered mixed results. The CSI 300 fell 0.82%, while the Shanghai Composite edged slightly higher. Hong Kong’s Hang Seng Index declined nearly 1% as geopolitical concerns and weaker offshore sentiment weighed on trading.
Data Highlights
USD Inflation Rate YoY (May) rose +40bps, from 3.8% to 4.2%, in line with consensus. USD Core Inflation Rate YoY (May) rose +10bps, from 2.8% to 2.9%, in line with consensus. USD PPI YoY (May) rose +80bps, from 5.7% to 6.5%, +10bps from the softer expected increase to 6.4%. USD Core PPI YoY (May) stayed the same at 4.9%, against a wrongly over-assumed +50bps rise toward 5.4%. CAD BoC Interest Rate Decision stayed the same at 2.25%. GBP GDP YoY (Apr) stayed the same at 1.2%, consensus wrongly expected a +10bps increase toward 1.3%. EUR ECB Interest Rate Decision rose +25bps, from 2.15% to 2.4%, in line with consensus. EUR Inflation Rate YoY (May) rose +110bps, from 0.8% to 1.9%, 10bps above the expected increase to 1.8%. JPY GDP Growth Annualized (Q1) rose +30bps, from 0.2% to 0.5%, 20bps above the expected increase to 0.3%. JPY PPI YoY (May) rose +100bps, from 5.3% to 6.3%, against an expected increase to 5.5%. CNY PPI YoY (May) rose +110bps, from 2.8% to 3.9%, in line with consensus. CNY Inflation Rate YoY (May) stayed the same at 1.2%, against a wrongly forecasted rise to 1.3%.
Week Ahead
CNY Unemployment Rate (May), JPY BoJ Interest Rate Decision, AUD RBA Interest Rate Decision – Tuesday | GBP Inflation Rate YoY (May), GBP Core Inflation Rate YoY (May), EUR Inflation Rate YoY (May), EUR Core Inflation Rate YoY (May), USD Fed Interest Rate Decision – Wednesday | NZD GDP Growth Rate YoY (Q1), CHF SNB Interest Rate Decision, GBP BoE Interest Rate Decision, CAD PPI YoY (May) – Thursday | JPY Inflation Rate YoY (May), JPY Core Inflation Rate YoY (May) – Friday
