Global Markets Weekly Update 

U.S.

Major U.S. stock indexes finished the week lower. Declines were led by the technology-heavy Nasdaq Composite, which fell 4.68%, followed by the Russell 2000 and S&P 500 Indexes, the latter of which posted a weekly loss for the first time since March. The Dow Jones Industrial Average held up best, declining 0.32%.

Early gains tied to artificial intelligence (AI) optimism faded later in the week as investors weighed oil price volatility tied to Middle East headlines, elevated earnings expectations for AI-linked companies, a growing pipeline of AI-related equity issuance, and a stronger-than-expected May payrolls report that helped push Treasury yields higher on Friday. The payrolls surprise supported the view that the U.S. economy remains resilient, but it also raised concerns that persistent price pressures could keep the Federal Reserve on a restrictive path for longer.

Payroll growth beats forecasts

In economic news, Friday’s closely watched nonfarm payrolls report capped a week of mixed labor market data with an upside surprise. The Bureau of Labor Statistics reported that the U.S. economy added 172,000 jobs in May, well ahead of estimates for around 80,000, while April’s reading was revised up to 179,000 from 115,000. May job growth was led by gains in leisure and hospitality, local government, and health care. The unemployment rate was unchanged at 4.3%. 

Meanwhile, the Labor Department reported on Tuesday that job openings rose to 7.618 million in April, well above expectations for around 6.79 million and the highest level in nearly two years. Private payrolls firm ADP later reported that private employers added 122,000 jobs in May, also above consensus estimates. 

However, initial jobless claims for the week ended May 30 came in at 225,000, an increase of 13,000 from the prior week and the highest reading since early February. Consulting firm Challenger, Gray & Christmas also reported that announced layoffs at U.S. employers increased for the third consecutive month in May, rising 16% from April to about 97,000. The report noted that companies cited AI as the leading reason for job cuts for the third consecutive month.

PMI data highlight resilient activity, persistent price pressures

Other data from the week generally pointed to continued resilience in the U.S. economy alongside ongoing inflation pressures. The Institute for Supply Management’s (ISM) manufacturing Purchasing Managers’ Index (PMI) rose 1.3 points to 54.0 in May, ahead of consensus estimates and the highest in four years. New orders expanded for the fifth consecutive month, while the prices index eased modestly but still indicated rising prices for the 20th month in a row. The ISM services PMI also beat expectations, rising to 54.5 from 53.6, with new orders strengthening and the prices index climbing to its highest level since August 2022. In both surveys, employment remained in contraction territory.

S&P Global’s PMI readings were more mixed, with manufacturing showing solid expansion while services growth was more muted, though both surveys also highlighted elevated price pressures. 

The Fed’s Summary of Commentary on Current Economic Conditions pointed to similar dynamics, noting increased activity in 10 of the 12 Fed districts while “prices increased at a moderate to strong pace overall.”

Treasury yields rise amid stronger economic data and shifting Fed policy expectations

U.S. Treasuries generated losses for the week, with yields moving higher across most maturities as solid economic data, oil price volatility, and some hawkish commentary from Fed officials fueled concerns that inflation pressures could keep monetary policy restrictive. (Bond prices and yields move in opposite directions.) After ending the prior week at 4.44%, the yield on the benchmark 10-year U.S. Treasury note increased to around 4.55% by Friday afternoon. 

Investment-grade corporate bonds also declined, underperforming Treasuries, although new issues were generally oversubscribed. T. Rowe Price traders noted that year-to-date supply in the market is at its fastest pace since 2020. Our traders also noted that high yield bond market sentiment was mixed but constructive despite bouts of volatility fueled by oil price swings, renewed geopolitical tensions, and shifting rate expectations.

Europe

The pan-European STOXX Europe 600 Index declined 0.53% in local currency terms. European markets appeared to lack direction as investors digested the likelihood of successful negotiations between the U.S. and Iran, a possible ceasefire between Israel and Lebanon, and an announcement on Wednesday from the Trump administration that it is planning on imposing new tariffs of 10% to 12.5% on many countries. Among major stock indexes, Germany’s DAX closed 1.38% lower, France’s CAC 40 Index rose 0.43%, and Italy’s FTSE MIB fell 0.29%. The UK’s FTSE 100 Index slipped 0.40%. 

Eurozone economy contracted in Q1

According to final data from Eurostat, the euro area economy shrank by 0.2% in the first quarter—a downward revision from initial estimates that had pegged gross domestic product growth at 0.1%. The sharpest decline was in Ireland, where the economy contracted 12.1%.

Retail sales fall 

Retail sales volumes in the eurozone fell 0.4% sequentially in April, led by nonfood products.

A consensus estimate had called for a 0.3% drop. Retail trade fell 0.2% in Germany and 1.5% in Spain. However, retail sales volumes in France increased by 0.3%. 

Industrial output in France broadly flat

Industrial production in France edged up 0.1% month over month in April—better than the 0.2% decline that had been expected. The strongest gains included the manufacturing of coke and refined petroleum products and transport equipment. Other data showed that France’s trade deficit narrowed in April, driven by rising exports of transport equipment and mechanical, electrical, electronic, and computer equipment.

Higher-than-expected car sales in the UK driven by electric vehicles

The latest data from the Society of Motor Manufacturers and Traders indicated that new car sales climbed by 7.1% year over year in May 2026—the highest May figure since 2019. Petrol and diesel car registrations fell by 7.1% and 2.2%, respectively, while plug-in hybrid sales surged by 23.9% and battery electric vehicle registrations climbed by 34.2%.

Japan

Japan’s stock market returns were mixed over the week, with the Nikkei 225 Index gaining 0.39% while the broader TOPIX fell 0.20%. Investor sentiment remained cautious amid the fragile ceasefire between the U.S. and Iran, with elevated energy prices keeping inflation risks and the outlook for interest rates firmly in focus. The yield on the 10-year Japanese government bond was broadly unchanged over the week at 2.66%.

Hawkish comments by BoJ governor heighten chance of June rate hike

Bank of Japan (BoJ) Governor Kazuo Ueda's latest comments were interpreted as increasing the likelihood of a June rate hike, as they suggested that responding to inflation should take priority. In a speech on June 3, Ueda spoke about the central bank’s thinking on the future conduct of monetary policy, including the policy response to recent supply shocks stemming from the situation in the Middle East. He asserted that while the bank should be attentive to downside risks to economic activity, it should be more vigilant about the risk of a significant upward deviation in inflation materializing. Even if the Middle East situation remains unclear, should the bank judge that upside risks to prices outweigh downside risks to economic activity, it will be necessary to thoroughly discuss the pros and cons of raising the policy interest rate. 

Wage growth exceeds expectations, yet consumer caution persists

Japan’s nominal average wages rose 3.5% year over year, above the 3.2% increase anticipated by consensus and the revised 3.1% registered in March. Real (inflation-adjusted) wages rose for a fourth straight month, as government gasoline subsidies and other measures helped to curb price increases. Separate data showed that household spending remained weak, although the 0.5% year-over-year contraction in April was narrower than the 1.5% decline forecast and March’s 2.9% fall. This contraction extended the trend of falling consumer spending to five consecutive months.

Yen weakness persists despite recent currency interventions

The yen weakened to around JPY 160 against the U.S. dollar from JPY 159.2 at the end of the previous week, falling to the closely watched level where authorities have previously intervened. This prompted fresh verbal warnings from authorities, with Finance Minister Satsuki Katayama warning of decisive action to defend the yen, using the same rhetoric that preceded Japanese authorities’ most recent interventions to support the country’s currency. Ministry of Finance data confirmed that foreign exchange interventions totaling JPY 11.735 trillion (USD 73.6 billion) were conducted between April 28 and May 27.

China

China equities ended the week lower as investors weighed signs of uneven economic recovery amid continued resilience in parts of the private and technology sectors. The CSI 300 Index fell 1.54%, while the Shanghai Composite Index declined 1.00% in local currency terms, according to FactSet. Hong Kong equities also weakened, with the Hang Seng Index falling 0.88%, although technology-related gains helped limit losses. Investor attention centered on May PMI data, which highlighted an uneven recovery, while developments in China's AI sector provided a bright spot for technology sentiment.

May PMI surveys point to uneven economic momentum 

On the economic front, China's official manufacturing PMI eased to 50.0 in May from 50.3 in April, indicating that factory activity lost momentum and remained at the threshold between expansion and contraction. However, the softer official survey contrasted with the private sector RatingDog China General Manufacturing PMI, compiled by S&P Global, which remained in expansion territory at 51.8, highlighting greater resilience among smaller and privately owned firms. The divergence may reflect differences in the composition of the two surveys, with the official PMI more heavily weighted toward larger and state-owned enterprises, while the RatingDog survey captures a greater share of smaller private sector companies. For investors, the mixed readings supported the view that policymakers could continue to rely on targeted measures to support domestic demand rather than broad-based stimulus.

Tencent and DeepSeek underscore AI commercialization trend

Meanwhile, investors also remained focused on China's AI sector as companies increasingly shift from model development toward commercial deployment. Tencent Holdings is testing an embedded AI agent for WeChat, China's largest social media and payments platform, and could begin the regulatory approval process as early as this month, according to the Financial Times. Tencent's Hong Kong-listed shares rose following the news. Separately, media reports indicated that China’s popular AI startup DeepSeek is exploring a potential fundraising round that could value the company at roughly USD 52 billion, although neither the company nor prospective investors have publicly confirmed any fundraising plans. The developments added to positive AI-related news flow and highlighted the growing focus on commercialization.

Other key markets

Colombia

Colombia rally reflects improved sentiment ahead of presidential runoff

Colombian markets rallied this week after the first round of the presidential election delivered a stronger-than-expected result for right-wing candidate Abelardo de la Espriella. He finished ahead of left-wing candidate Iván Cepeda, and the two will face each other in a June 21 runoff. Markets appeared to view the result as increasing the likelihood of a more market-friendly policy direction, including greater fiscal discipline and a less confrontational stance toward the private sector.

However, the outcome remains uncertain. Cepeda still received a large share of the vote, and the runoff is expected to be competitive. As a result, markets could remain sensitive to polling, endorsements, turnout expectations, and the candidates’ economic proposals, according to T. Rowe Price Sovereign Analyst Christopher Mejia.

The market reaction was broad-based: Equities rose, the peso strengthened against the U.S. dollar, and local government bonds gained as yields fell. Colombia also benefited from higher oil prices, which can support government revenues because oil is a key export and source of tax and royalty income. However, the fiscal benefit will depend on production levels and spending discipline.

Indonesia

Rupiah pressure and policy uncertainty drive Indonesia market sell-off

Indonesia was one of the weaker markets in Asia this week, as investors focused on a combination of currency pressure, higher oil prices, and rising uncertainty around economic policy. Higher oil prices raised concerns about inflation, subsidy costs, and pressure on the country’s external balances. At the same time, investors were assessing recent policy changes, including revisions to the financial-sector law that broadened Bank Indonesia’s mandate to include support for economic growth and give parliament a larger oversight role.

Indonesian equities fell over the week, including a sharp decline on Wednesday following fresh U.S.-Iran military exchanges, and ended the week at a four-year low. The rupiah also weakened to record lows, increasing concerns about the cost of imports and energy, which can affect inflation, company margins, and the ability of borrowers to manage U.S. dollar-denominated debt. Market pricing suggested investors were waiting for clearer evidence of currency stability, fiscal discipline, and policy consistency before taking a more constructive view on Indonesian assets.