2026 Weekly Update

Market update

The S&P 500 closed the week at 7’408.5, +0.13% higher. The Dow Jones closed at 49’526.17, -0.17%, with the Nasdaq lower by -0.08%. The volatility index VIX closed the week at 18.43, up from 17.19. The Euro Stoxx 600 fell -0.85%. 

The 10-year UST closed at 4.59%, up from 4.35% a week before. The yield curve is upward sloping with the yield spread between the 3-month and 10-year UST at 91bps. US Corporate Bond spreads: Investment Grade spreads narrowed 3bps at 78bps and High Yield spreads narrowed -3bps at 331bps. German 10-year Bunds yield closed at +3.17% up from +3.00% a week before. In Europe, Corporate Investment Grade spreads narrowed 1bp at 91bps and High Yield narrowed 5bps at 310bps. 

The US Dollar Index (DXY) appreciated +1.41% last week and closed at 99.28. The Euro closed at 1.1625 (-1.37%); the Yen depreciated -1.31%, closing at 158.74 and the Swiss Franc depreciated -1.33%, closing at 0.7869. Gold closed at $4’540.08, depreciating -3.71%. Oil was higher, Brent closed at $109.26 (+7.87%) and WTI at $105.42 (+10.48%).

Macroeconomy

US prices

The US April CPI report came in hot, with headline inflation rising +0.6% m-o-m, in line with expectations but still signaling persistent price pressures. On a y-o-y basis, headline CPI accelerated to +3.8%, up from +3.3% in March and slightly above consensus forecasts. Core inflation surprised to the upside at +0.4% m-o-m (vs. +0.3% expected) and +2.8% y-o-y (vs. +2.7% expected), both higher than the previous month. Energy was a major driver, with the energy index jumping 3.8% m-o-m, following a 10.9% surge in March, and gasoline prices up 5.4% m-o-m. Food prices also contributed, rising 0.6% m-o-m, with the largest monthly increase since 2022, while “food away from home” rose 0.2%. Shelter costs saw a notable uptick, climbing 0.6% m-o-m, led by higher hotel prices (+2.8%), rent of primary residence (+0.5%), and owners’ equivalent rent (+0.5%). Another important fact is that the preferred measure of soon-to-be Fed Governor Kevin Warsh, the Cleveland Fed’s trimmed mean CPI, came in at +0.43% m-o-m, its sharpest increase since January 2024.  Another challenge for markets came from a much stronger-than-expected PPI report. Producer prices jumped by 1.4% in April, nearly triple consensus expectations and marking the largest monthly increase since March 2022. This pushed the annual PPI rate up to 6.0%, its fastest pace since December 2022. Importantly, the surge was not limited to energy: core PPI also rose by 0.6%, double what was expected. These figures seem to push back against the idea that inflation pressures are just a temporary energy shock and instead fuel concerns about more persistent, broad-based inflation.

US Data

Elsewhere, markets got support from a robust batch of US data. Retail sales showed signs of resilience, with the headline measure up +0.5% in April as expected. Notably, the measure excluding autos and gas stations also rose +0.5% (vs. +0.3% expected), highlighting that strength wasn’t limited to energy-related categories. The Atlanta Fed’s GDPNow estimate for Q2 moved up from an annualized +3.7% rate to +4.0%, suggesting the economy remains on a strong footing. Meanwhile, weekly initial jobless claims rose a bit more than expected to 211k in the week ending May 9 (vs. 205k expected), but the 4-week moving average is still just 203.75k, only slightly above its two-year low the previous week.

The Fed

Kevin Warsh was formally confirmed by the Senate as Fed Chair in a 54-45 vote and will take over as Powell’s term ended last Friday. His appointment comes at a time when the FOMC has become increasingly cautious about the prospects for further easing. This cautious tone was echoed by Boston Fed President Collins, who stated that rates should remain on hold for “some time” and even suggested that some policy tightening could be needed, though she noted this was not the most likely scenario. Kansas City Fed President Schmid also highlighted that “continued inflation is the most pressing risk to the economy” and hawkish sentiment was even further reinforced by Chicago Fed President Goolsbee, who described the latest inflation print as “worse than expected,” particularly noting persistent services inflation.

China data

China's trade data, released on Saturday showed exports surging +14.1% y-o-y (+8.4% expected) with imports up +25.3% (+20.0% expected). Inflation released this morning showed CPI climbing +1.2% y-o-y (+0.9% expected), the same number for core, with PPI up +2.8% (+1.8% expected). Commodity prices seem to have pushed inflation higher than expected.

Trump – Xi meeting

President Trump concluded his State visit to China last week, with attention firmly on the evolving US-China relationship. While there were no major market-moving headlines, the tone was generally optimistic. President Xi emphasized that China’s “doors to the outside world will open wider and wider,” and Trump described bilateral ties as “better than ever,” rebranding the relationship as a “G2” partnership focused on strategic stability. Despite the positive rhetoric, the absence of a joint statement suggests that no broad, substantive agreements were reached, aside from “candid, in-depth, constructive exchanges.” On the economic front, China agreed to purchase US soybeans, oil, LNG, and other energy products, as well as 200 Boeing jets—though this order was at the lower end of expectations, leading Boeing shares to fall. The onshore yuan strengthened to its highest level in three years, closing at 6.79 per US dollar. Negotiations on technology controls and critical minerals remain complex, with no significant breakthroughs so far, but further trade-related announcements are expected. Geopolitically, both sides agreed on the importance of keeping the Strait of Hormuz open, and while the White House highlighted shared positions on the Middle East, China reiterated its stance on Taiwan. 

Highlights

On rates

US rates climbed last week, with Treasury yields rising across the curve as inflation concerns persisted. The 10-year yield advanced to 4.59%, while the 2-year yield increased to 4.07%. The 30-year yield reached 5.11%, its highest level since the 2007 global financial crisis. The move followed the April CPI report and Chicago Fed President Austan Goolsbee comments, who fueled expectations that the Federal Reserve may need to keep monetary policy restrictive for longer. In the UK, Gilt yields spiked on political uncertainty, with the 10-year yield up 18 basis points to 5.17%. Prime Minister is facing mounting pressure to step down, and concerns grew over a leadership challenge from Andy Burnham. Burnham is viewed as the least “Gilts-friendly” candidate and has previously commented on the need to move beyond “being in hock to the bond markets”, which could mean that a change in leadership could bring looser fiscal rules and increased government borrowing to fund higher spending. This prospect triggered a sell-off in UK bonds, as investors reassessed the country’s fiscal outlook. Across Europe, sovereign yields also jumped, French OATs, German Bunds, and Swiss yields are all up as markets integrated the prospect of persistent inflation and central bank caution. In Japan, the 10-year government bond yield climbed to 2.72%, reaching its highest level since 1997, as investors increasingly anticipate a potential rate hike by the Bank of Japan. A summary of opinions from last month’s BoJ board meeting revealed that policymakers are actively considering a rate increase at the next meeting, reflecting growing concerns about underlying inflation risks, particularly those linked to Iran-driven disruptions. Currently, markets are pricing in a 75% chance of a BoJ hike in June. Meanwhile, Japanese household spending fell by a larger-than-expected 2.9% y-o-y in March, underscoring the fragility of consumption even as wage growth continues. Looking ahead, this week’s focus will be on the release of the FOMC meeting minutes, Eurozone PMI data, CPI figures from Japan and Canada, all of which could provide further direction for global rates.

On Earnings

The Q1 2026 earnings season remains robust, with the vast majority of S&P 500 companies having now reported results and 84% beating EPS estimates. Y-o-y revenue growth is being recorded across all sectors, with Information Technology, Communication Services, Utilities, Real Estate, and Financials each posting double-digit gains. EPS growth reached +23% y-o-y, resulting in an EPS surprise factor of +18 percentage points. In Europe, EPS growth came in at +5% y-o-y, with a surprise factor of +4 percentage points. While these numbers are weaker than in the US, it is worth noting that if the “Magnificent 7” are excluded, US EPS growth drops to +14% y-o-y and the EPS surprise factor narrow to +6 percentage points, bringing US and European earnings growth closer. Among EuroStoxx companies, 94% of those expected to report have now released Q1 earnings, with 58% beating EPS estimates. Last week, Constellation Energy delivered a substantial beat, with adjusted EPS of $2.74 well above expectations. Siemens and Bayer also posted strong surprises, with EPS and core earnings both exceeding consensus. Zurich Insurance and Alstom reported solid, in-line results, while Alibaba disappointed, missing revenue forecasts. Looking ahead, investor focus will turn to key reports from Nvidia on Wednesday and Walmart on Thursday.

What to watch

• Monday: US New York Fed Services Business Activity; Singapore Exports; China April Data
• Tuesday: US ADP Employment; Canada CPI; UK Weekly Earnings; Japan Q1 Flash GDP
• Wednesday: FOMC Minutes; UK CPI; Eurozone CPI; China Prime Rate; Taiwan Export Orders
• Thursday: US Initial Jobless Claims and PMI; Eurozone and UK Flash PMI; Japan April Exports; South Korea May Exports
• Friday: US University of Michigan Survey; UK Retail Sales; Germany IFO; Australia Employment; Japan April CPI; Singapore Q1 GDP