Weekly Market Recap

The latest data from the Society of Motor Manufacturers and Traders indicated that new car sales climbed by 7.1% year over year (YoY) 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%.

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

Retail sales volumes in the eurozone fell 0.4% sequentially in April, led by non-food 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 production in France edged up 0.1% month over month (MoM) in April—better than the 0.2% decline that had been expected. The strongest gains were in the manufacturing of coke and refined petroleum products, and in 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.

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.

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 commercialisation.

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 3 June, 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 materialising. Even if the situation in the Middle East 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.

Japan’s nominal average wages rose 3.5% YoY, 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% YoY 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.

The yen weakened to JPY 160.3 against the US dollar from JPY 159.3 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 totalling JPY 11.735 trillion (USD 73.6 billion) were conducted between 28 April and 27 May.

Australia's national house prices fell 0.1% MoM in May, with annual growth slowing to 7.8% YoY. Price declines could accelerate in the coming months as demand weakens from rate hikes and tax changes. Residential building approvals fell 3.4% MoM in April, below expectations of a 1.6% decline. The Fair Work Commission announced a 4.75% increase in the national minimum wage and minimum award wages, above both inflation and overall wage growth rates. The award wage increase directly affects about 21% of workers, adding to the stickiness of wage growth. Australian GDP increased 0.3% quarter-on-quarter (QoQ) in the first quarter of 2026, a touch below expectations of 0.4% QoQ, with YoY growth remaining at 2.5%. The impact of weather disruptions on export-dependent industries was quoted as the main reason for the downward surprise.

Canada's May jobs report showed employment surging 87,800—nearly nine times the consensus estimate of 10,000—and the unemployment rate falling to 6.6% from 6.9%, its largest monthly drop in some time. The data triggered a sharp selloff in Canadian government bonds, with 10-year real yields rising sharply, and prompted Morgan Stanley to recommend buying the Canadian dollar, given commodity prices and relative rate expectations. The strong labour data, combined with strong May PMIs, reinforced a picture of an economy that, despite two consecutive quarters of GDP contraction, has not been officially declared in recession by the C.D. Howe Business-Cycle Council.

Last week, the MSCI All Country World Index (MSCI ACWI) lost -2.2% (9.9% YTD).

The S&P 500 Index finished the week -2.5% lower (8.4% YTD), posting a weekly loss for the first time since March. 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 payroll surprise supported the view that the US economy remains resilient, but it also raised concerns that persistent price pressures could keep the Fed on a restrictive path for longer.

Large-cap growth stocks underperformed their value counterparts, while small caps underperformed large caps. The Russell 1000 Growth Index returned -4.0% (3.9% YTD), the Russell Value Index -0.7% (12.9% YTD) and the Russell 2000 Index -2.9% (14.8% YTD). The technology-heavy Nasdaq Composite dropped -4.7% (10.9% YTD).

In Europe, the MSCI Europe ex-UK Index ended the week with a -0.5% loss (6.9% YTD). European markets appeared to lack direction as investors digested the likelihood of successful negotiations between the US and Iran, a possible ceasefire between Israel and Lebanon, and an announcement on Wednesday from the Trump administration that it plans to impose new tariffs of 10% to 12.5% on many countries. Most major stock indices retreated. Germany’s DAX Index lost -1.4% (1.1% YTD), France’s CAC 40 Index added 0.5% (3.2% YTD), and Italy’s FTSE MIB Index slipped -0.3% (13.9% YTD). Switzerland’s SMI decreased by -1.1% (3.9% YTD). The euro weakened against the US dollar, closing the week at USD 1.15 for EUR, down from 1.17.

The FTSE 100 Index in the UK edged down -0.4% (6.2% YTD), while the FTSE 250 Index was down -1.5% (4.3% YTD). The British pound depreciated against the US dollar, closing at USD 1.33 for GBP, down from 1.35.

Japan’s stock market returns were weak over the week. The TOPIX Index gave back -0.2% (17.1% YTD), and the TOPIX Small Index declined -0.8% (14.2% YTD). Investor sentiment remained cautious amid the fragile ceasefire between the US and Iran, with elevated energy prices keeping inflation risks and interest-rate outlook firmly in focus. The yield on the 10-year Japanese government bond was broadly unchanged over the week at 2.66%.

In Australia, the S&P/ASX 200 Index lost -1.2% (0.9% YTD) due to renewed exchanges of fire in the Middle East, weaker-than-expected domestic economic data, and sticky wage pressures. Australian government bond yields shifted higher amid rising inflation risk, while the curve remained largely unchanged. The Australian dollar weakened against the US dollar by 0.8%.

In Canada, the S&P/TSX Composite was down -1.0% (9.6% YTD).

The MSCI Emerging Markets Index decreased by -1.9% (23.3% YTD). The Taiwanese market contributed positively, while the Chinese, South Korean, Indian and Brazilian markets contributed negatively.

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 onshore CSI 300 Index, the main onshore benchmark, lost -1.5% (4.6% YTD), while the Shanghai Composite Index moved -0.9% lower (2.0% YTD). Hong Kong's benchmark Hang Seng Index declined by -0.6% (-1.4% YTD), although technology-related gains helped limit losses. Investor attention centred on May PMI data, which highlighted an uneven recovery, while developments in China's AI sector provided a bright spot for technology sentiment. The MSCI China Index, which primarily comprises offshore-listed stocks, added 0.3% (-7.6% YTD).

In Colombia, 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 21 June 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 US 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.

Elsewhere, Indonesia was among the weaker markets in Asia this week, as investors focused on 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 US-Iran military exchanges, and ended the week at a four-year low. The rupiah also weakened to record lows, heightening concerns about import and energy costs, which can affect inflation, corporate margins, and borrowers' ability to manage US 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.

Last week, the Bloomberg Global Aggregate Index (hedged to USD) returned -0.4% (0.3% YTD), the Bloomberg Global High Yield Index (hedged to USD) -0.2% (2.0% YTD), and the Bloomberg Emerging Markets Hard Currency Aggregate Index -0.4% (1.0% YTD).

US Treasuries posted losses for the week, with yields rising across most maturities as solid economic data, oil price volatility, and some hawkish commentary from Fed officials fuelled concerns that inflation pressures could keep monetary policy restrictive. Over the week, the 10-year Treasury yield increased by 9bps to 4.53% from 4.44% (up 36bps YTD). The 2-year Treasury yield rose by 14bps, ending the week at 4.15% from 4.01% (up 67bps YTD).

US investment-grade corporate bonds also declined, underperforming Treasuries, although new issues were generally oversubscribed. Year-to-date supply in the market was at its fastest pace since 2020. Sentiment in the high-yield bond market was mixed but constructive despite bouts of volatility fuelled by oil price swings, renewed geopolitical tensions, and shifting rate expectations.

Over the week, the 10-year German Bund yield increased by 10bps, ending at 3.04% from 2.94% (up 18bps YTD). The 10-year UK gilt yield rose by 9bps, ending the week at 4.90% from 4.81% (up 43bps YTD).