Global Markets Weekly Update 

U.S.

Most major U.S. stock indexes finished the week lower as optimism surrounding large-cap technology and artificial intelligence (AI)-related stocks was largely outweighed by concerns around accelerating inflation, rising Treasury yields, elevated oil prices, and lingering geopolitical uncertainty.

Within the S&P 500 Index—which closed at a record high on Thursday before pulling back Friday—the energy sector advanced the most, while consumer staples and information technology also posted gains. On the other hand, the consumer discretionary, real estate, and materials sectors led declines.

U.S. Treasuries also fell over the week as yields increased across most maturities in response to higher energy prices and the week’s hotter-than-expected inflation data. (Bond prices and yields move in opposite directions.) As of Friday afternoon, the yield on the benchmark U.S. 10-year Treasury note had increased to around 4.59%, the highest level in over a year.

Inflation accelerates in April

On Tuesday, the Bureau of Labor Statistics (BLS) reported that its consumer price index (CPI) rose 0.6% from the prior month in April, in line with expectations and following a 0.9% increase in March, while prices increased 3.8% over the prior 12 months, the sharpest jump since May 2023. Energy prices remained a notable driver of inflation, rising 3.8% during the month after a 10.9% increase in March. Core CPI, which excludes food and energy costs, rose 0.4% in April and 2.8% over the prior 12 months, above estimates for increases of 0.3% and 2.7%, respectively. 

Wholesale price data released on Wednesday reinforced concerns about persistent price pressures. The BLS reported that its producer price index rose 1.4% in April, the largest monthly increase since March 2022, while prices jumped 6.0% over the prior 12 months. Energy prices saw a sharp rise for the second straight month, increasing 7.8% after a 10.1% rise in March. 

Chicago Fed President Austan Goolsbee acknowledged after the CPI release that the U.S. has an “inflation problem” and that inflation is “going the wrong way not just in oil-related things and not ‌just in tariff-related things," helping fuel concerns that the Federal Reserve may need to keep monetary policy restrictive for longer. 

Retail sales rise; jobless claims see modest uptick

U.S. retail sales rose 0.5% in April, in line with consensus expectations but slowing from March’s downwardly revised 1.6% increase. Sales excluding autos rose 0.7%, while control group sales, which feed into gross domestic product (GDP) calculations, increased 0.5%. The headline increase was driven by sales at gas stations, sporting goods and hobby stores, and electronics and appliance stores, while sales at furniture and clothing stores declined. 

Meanwhile, initial claims for unemployment insurance during the week ended May 9 came in at 211,000, slightly above estimates for around 207,000 and the prior week’s revised reading of 199,000, while continuing claims increased by 24,000 from the prior week to 1.782 million.

Europe

The pan-European STOXX Europe 600 Index ended the week down 0.85% in local currency terms. European corporate results for the quarter have broadly shown robust earnings growth. However, across the region, geopolitical tensions continued to weigh on sentiment. U.S.-Iran peace talks showed signs of stalling, raising fears that higher energy prices could lead to inflationary pressures and higher interest rates. Among major stock indexes, Germany’s DAX closed 1.59% lower, Italy’s FTSE MIB fell 0.35%, and France’s CAC 40 Index declined 1.97%. The UK’s FTSE 100 Index slipped 0.37%.

Industrial output growth more subdued than expected

Industrial production in the eurozone grew by 0.2% month over month in March 2026, just shy of the 0.3% that had been expected. Intermediate goods and capital goods grew the most, while energy and nondurable consumer goods both saw falls in production. On an individual country basis, Germany’s industrial output declined; France, Italy, and Spain posted increases in industrial production.

Unemployment in France at highest level since 2021

Unemployment in France climbed to a higher-than-expected 8.1% in the first quarter—the highest level since early 2021. The jobless rate among young people ages 15 to 24 remained elevated but nudged lower to 21.1% from 21.5%.

Improvement in investor sentiment in Germany

The May reading of Germany’s ZEW Indicator of Economic Sentiment rose to -10.2. Even though the index remained in negative territory, this reading represented a recovery from the -17.2 registered in April and surpassed market expectations of -19.8. Weak industrial production, rising energy prices, and inflation above 2% were cited as factors behind investors’ gloomy outlook.

UK retail sales sharply lower

Prime Minister Keir Starmer faced intense pressure to step down, with several government ministers resigning and growing speculation that Andy Burnham could launch a challenge for the leadership of the Labour Party. The political uncertainty dampened investor sentiment, pressuring both stocks and sterling.

UK retail sales fell by 3.0% year over year in April, according to the British Retail Consortium. This was lower than the 12-month average growth of 1.8%.

Japan

Japan’s equity markets generated mixed performance over the week, with the Nikkei 225 Index declining 2.08% while the broader TOPIX Index gained 0.90%. Semiconductor- and AI-related shares were subject to some profit taking following strong recent gains, while financials and other value-oriented sectors benefited from rising domestic bond yields and growing expectations that the Bank of Japan (BoJ) would continue to normalize monetary policy. Investor sentiment was tempered by concerns that higher oil prices could weigh on Japan’s economic outlook through rising import costs and pressure on household consumption, given the country’s heavy dependence on imported energy.

Concerns remain about excessive yen volatility

The yen weakened to around the JPY 158 range against the U.S. dollar from JPY 156.6 at the end of the previous week. Suspected official intervention by Japanese authorities in the foreign exchange market in late April appeared to have only a temporary impact, with investors remaining focused on the divergence between the Federal Reserve’s relatively restrictive policy stance and the BoJ’s still-accommodative monetary settings. U.S. officials echoed Japan’s view that excessive foreign exchange volatility is undesirable, while also noting that Japan’s strong economic fundamentals should ultimately be reflected in the exchange rate over time.

Japanese government bond yield reaches highest level since 1997

The yield on the 10-year Japanese government bond (JGB) rose to 2.72% from 2.48% at the end of the prior week. The JGB yield scaled its highest levels since 1997 as investors increasingly converged around the view that an interest rate hike by the BoJ could be imminent. The Summary of Opinions at the BoJ’s April meeting contained the view that the central bank had adopted a wait-and-see approach because it was difficult to foresee the impact of the situation in the Middle East. One board member opined that even if the situation in the Middle East remains unclear, given that the impact on Japan’s economy will become apparent to some degree, it is possible that the BoJ will raise the policy interest rate from the next monetary policy meeting onward. 

Economic data highlight cost pressures and weak household consumption

On the economic data front, Japan’s corporate goods price index, which measures input prices for Japanese firms, surged in April, advancing 4.9% year over year, ahead of consensus expectations for 3.0% and a revised 2.9% increase in March. Much of the gain was due to higher prices for petroleum and chemical products. Separate data showed that household spending fell 2.9% year over year in March, more than consensus expectations for a 1.3% decline and compared with a 1.8% drop in March.

China

China equities ended the week lower after early gains linked to the Trump-Xi summit and stronger-than-expected macro data faded later in the week. The CSI 300 Index edged lower by 0.25% while the Shanghai Composite Index declined 1.07% in local currency terms, according to FactSet. Hong Kong equities underperformed regional peers amid continued caution toward China internet and export-sensitive sectors, with the Hang Seng Index falling 1.63%. Investor sentiment was initially supported by expectations for continued U.S.-China stabilization alongside resilient April trade and inflation data, although the absence of major policy breakthroughs at the summit limited follow-through buying.

Trump-Xi summit reinforces U.S.-China stabilization views

President Donald Trump and President Xi Jinping concluded a two-day summit in Beijing on May 15, with both sides signaling support for stable relations. U.S. officials said China was prepared to increase purchases of U.S. agricultural and energy products, while both governments discussed mechanisms to manage disputes around semiconductors and rare-earth supply chains, although no major rollback of export restrictions was announced. 

Xi said U.S.-China economic ties are “mutually beneficial in nature,” while Trump described bilateral relations as “better than ever before.” At the same time, Xi reiterated that Taiwan remained “the most important issue” in bilateral relations and warned that mishandling the issue could jeopardize broader ties. 

For markets, the summit appeared to reinforce expectations that Washington and Beijing remain focused on preventing renewed escalation in trade and technology tensions, helping limit downside sentiment across China and regional equities through the week. Trump also invited Xi for a state visit to Washington in September.

Firmer inflation data reduce near-term easing expectations

China’s producer price index rose 2.8% year over year in April, accelerating from 0.5% in March and exceeding consensus expectations, marking the fastest pace since July 2022. The increase was driven partly by higher prices in commodity-related sectors, including nonferrous metals and oil and gas processing, alongside firmer demand linked to AI-related investment.

Consumer inflation also strengthened modestly, with the consumer price index rising 1.2% year over year versus 1% in March, supported by higher gasoline and gold jewelry prices despite continued weakness in food prices. Core inflation, which excludes volatile food and energy prices, also rose 1.2% year over year.

The data supported the view that industrial activity and pricing conditions are stabilizing, reducing near-term pressure on Beijing to deliver broad-based monetary easing despite persistent external uncertainties and uneven domestic demand conditions.

Export strength underscores external-demand resilience

China’s exports rose 14.1% year over year in April, accelerating from March’s reading and exceeding market expectations, while imports increased 25.3%, reflecting firmer domestic demand and higher commodity purchases. Exports to the United States rose 11.3% from a year earlier despite ongoing tariff and export-control tensions ahead of the Trump-Xi summit. 

Other key markets

Venezuela
Debt restructuring plans spark strong rally in sovereign and PDVSA bonds

Venezuela was back in focus this week after the government formally launched what could become one of the world’s largest sovereign debt restructurings. Authorities announced plans to restructure both sovereign debt and liabilities tied to state oil company PDVSA, with total obligations estimated at approximately USD 150 billion when unpaid bonds, arbitration awards, accrued interest, and commercial claims are included. Officials described the debt burden as “unsustainable” and said that they plan to release a macroeconomic framework and debt sustainability analysis next month as part of the process. The announcement also reflects broader efforts to reconnect Venezuela with international financial institutions after years of isolation following the country’s 2017 default. 

Markets reacted positively to the news, with Venezuelan sovereign and PDVSA bonds rallying sharply as investors priced in the possibility of eventual normalization and formal negotiations with creditors. Investors also appeared encouraged by improving engagement with the United States and multilateral institutions, including potential discussions with the International Monetary Fund. Still, the restructuring process is expected to remain highly complex due to ongoing litigation, coordination among creditors, and the need for additional U.S. sanctions relief before a full debt overhaul can proceed.

Hungary
Policy reset supports sentiment, but forint volatility returns

Péter Magyar took office as Hungary’s prime minister, and investors weighed the new government’s reform agenda against fresh currency and European Union (EU)-related risks. His government signaled a sharp policy shift from the prior administration, pledging to improve relations with the EU, restore policy predictability, and pursue a path toward euro adoption. New Finance Minister András Kármán said that the government aims to meet euro adoption conditions by 2030 and bring the budget deficit below 3% of GDP, while also working to secure roughly EUR 10.4 billion in frozen EU recovery funds before they expire at the end of August. 

Markets had already rallied on expectations of a more orthodox policy path, but the forint weakened after the National Bank of Hungary unexpectedly lowered the rate on its foreign-currency swap facility to 5.25% from 5.75%. Although the central bank said the move did not signal a change in its “strict and careful” monetary policy stance, some investors viewed it as a sign that policymakers may want to limit the currency’s strength. At the same time, Hungary’s desire to diversify—but not fully abandon—Russian energy imports could create tension with the EU, which is seeking to phase out Russian oil and gas. For investors, the near-term outlook looks more constructive than before, but Hungarian assets are likely to remain sensitive to central bank signals, the forint’s path, and whether the government can unlock EU funding without triggering new disputes with Brussels.