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Week commencing 18 May 2026
Global markets remain near highs as investors weigh inflation data, interest rate expectations and key economic releases across major economies.
S&P 500 and Nasdaq 100 hit fresh highs
United States (US) equity markets extended their powerful rally from late March lows, with the S&P 500 and Nasdaq 100 carving out fresh all‑time highs on their way to a seventh consecutive week of gains. Solid corporate earnings, strong demand for artificial intelligence (AI)‑related stocks, and resilient economic data enabled investors to largely shrug off the ongoing Middle East stalemate and elevated oil prices.
The week that was: highlights
- US inflation came in hotter than expected, with the headline consumer price index (CPI) rising 3.8% year‑on‑year (YoY) in April, exceeding the consensus forecast of 3.7% and up from 3.3% previously. Core inflation also surprised to the upside, rising 2.8% YoY against forecasts of 2.7%
- Staying in the US, April’s producer price index (PPI) surged 1.4% month‑on‑month (MoM), significantly outpacing the consensus estimate of 0.5%. The core PPI rose 1.0% MoM against forecasts of 0.3%
- US initial jobless claims ticked higher to 211,000 last week but remained relatively contained, while continuing claims rose by 24,000 to 1,782,000, compared with expectations of 1,179,000
- US retail sales rose 0.5% in April, while the control group also rose 0.5%, slightly ahead of the 0.4% consensus
- China’s (CN) headline inflation rate accelerated to 1.2% YoY in April, beating the consensus forecast of 0.8%
- China’s PPI also jumped, rising 2.8% YoY compared with expectations of 1.5%
- In Japan (JP), household spending fell 1.3% MoM in March, missing the consensus forecast for a 0.6% increase and reversing the previous month’s 1.5% gain
- However, Japan’s current account surplus for March widened to ¥4,682 billion, exceeding the forecast of ¥3,879 billion
- West Texas Intermediate (WTI) crude oil gained 2.15% to $97.47
- The US dollar index (DXY) rose 1.17% to 98.98
- Bitcoin fell 0.68% to $86,634
- Gold declined 1.95% to $4623
- Wall Street’s gauge of fear, the volatility index (VIX), edged up to 17.25 from 17.18 the previous week.
Key dates for the week ahead
China & Japan
- CN – House price index: Monday, 18 May at 11.30am AEST
- CN – Industrial production and retail sales: Monday, 18 May at 12.00pm AEST
- JP – Gross domestic product (GDP) growth rate preliminary: Tuesday, 19 May at 9.50am AEST
- JP – S&P Flash purchasing managers’ indices (PMIs): Thursday, 21 May at 10.30am AEST
- JP – Inflation rate: Friday, 22 May at 9.30am AEST
United States
- US – Federal Open Market Committee (FOMC) minutes: Thursday, 21 May at 4.00am AEST
- US – Building permits and housing starts: Thursday, 21 May at 10.30pm AEST
- US – Initial jobless claims: Thursday, 21 May at 10.30pm AEST
- US – Philadelphia Fed manufacturing index: Thursday, 21 May at 10.30pm AEST
- US – S&P Flash PMIs: Thursday, 21 May at 11.45pm AEST
- US – Michigan consumer sentiment (final): Saturday, 23 May at 12.00am AEST
Europe & United Kingdom
- UK – Unemployment rate: Tuesday, 19 May at 4.00pm AEST
- UK – Inflation rate: Wednesday, 20 May at 4.00pm AEST
- EA – S&P Flash PMIs: Thursday, 21 May at 6.00pm AEST
- UK – S&P Flash PMIs: Thursday, 21 May at 6.30pm AEST
- UK – Retail sales: Friday, 22 May at 4.00pm AEST
Key events for the week ahead
UK: inflation rate
Date: Wednesday, 20 May at 4.00pm AEST
For March, headline CPI inflation rose to 3.3% YoY, up from 3.0%, while the core rate (excluding energy, food, alcohol and tobacco) eased to 3.1% from 3.2%.
April’s print will be the first inflation report since the Bank of England’s (BoE) April monetary policy report, which incorporated the initial energy‑price shock from the Middle East conflict and lifted near‑term CPI projections by 1.4% to 3.3% in the third quarter (Q3).
The report outlined three energy‑price scenarios:
- Scenario A – short‑lived shock
- Scenario B – modest persistence (base case)
- Scenario C – prolonged shock, pushing CPI above 6% in early 2027
Governor Bailey highlighted risks skewed to the upside, while policymakers noted they ‘stand ready to act’ depending on the scale and duration of the shock.
A stronger‑than‑expected print would reinforce the roughly 60 basis points (bp) of tightening priced into UK rates markets by year end.
UK core inflation chart
AU: labour force
Date: Thursday, 21 May at 11.30am AEST
Last month, the March employment data delivered a softer‑than‑expected gain of 17,900 jobs, missing the roughly 20,000 consensus forecast, following an upwardly revised 49,600 increase in February. At the same time, the unemployment rate held steady at 4.3%, with the participation rate easing slightly to 66.8% from 66.9%.
Overall, this print marked a cooling from recent stronger gains but still aligned with the Reserve Bank of Australia (RBA)’s assessment in its May statement on monetary policy that labour‑market conditions remain ‘somewhat tight’ relative to full employment.
The unemployment rate has stayed around 4.3% for the past 10 months, broadly in line with the central bank’s near‑term forecasts, even as higher interest rates and cost‑of‑living pressures begin to weigh on demand. The RBA continues to watch for signs that this tightness could feed into wage growth and inflation, particularly amid the added upside risks from energy prices.
Looking ahead to the April update, expectations point to an employment gain of around 20,000, with the jobless rate anticipated to hold steady at 4.3%. Any result that confirms ongoing labour‑market resilience, particularly if full‑time jobs continue to hold up, will keep the RBA’s focus squarely on wage pressures and lingering inflation risks, supporting the case for further tightening of monetary policy. Conversely, a materially softer outcome, especially one that sees the unemployment rate tick higher toward 4.5%, would underscore easing capacity pressures and significantly dial back expectations for further tightening later in the year.
As it stands, the Australian interest‑rate market is set to finish the week pricing in approximately 5 bp of rate hikes for the next RBA board meeting in June. Looking further out, there is a cumulative 36 bp of tightening priced in for the remainder of 2026.
AU unemployment rate chart
US: S&P Flash PMIs
Date: Thursday, 21 May at 11.45pm AEST
For April, the S&P Global US flash composite PMI rose to 51.7 from 50.3 in March. The Manufacturing PMI rose to 54.5 from 52.3 in March – its strongest reading since May 2022. New orders rose at the fastest pace in four years, while output accelerated sharply on stockpiling efforts to mitigate the impact of the energy shock.
The Services PMI recovered to 51.0 from the three‑year low of 49.8, though new business intake fell for the first time in two years on war‑related uncertainty and tariff concerns. Input price pressures remained elevated across both sectors due to higher energy and staffing costs.
The May figures due next week will be closely watched for signs that this resilience is holding – particularly after this week’s hotter‑than‑expected inflation data has lifted the odds of the Federal Reserve’s (Fed) next move being a hike early next year.
The US rates market is set to finish the week pricing in around 10 bp of Fed hikes for the rest of 2026, with a full 25 bp hike 80% priced for April 2027.
US composite PMI chart
JP: inflation rate
Date: Friday, 22 May at 9.30am AEST
Last month, Japan’s national CPI rose 1.5% YoY in March, with the core measure (excluding fresh food) holding steady at 1.8%. Consensus forecasts for April’s release point to a headline CPI print of 1.7% YoY, while the core ex‑fresh food measure is expected to remain around 1.8%.
Markets will be watching closely for signs that underlying pressures from Japanese yen weakness and higher imported costs are keeping the core trend firm. This comes after the Bank of Japan’s (BOJ) 27 to 28 April meeting, where policymakers kept rates steady at 0.75% but delivered a sharp upward revision to their fiscal year (FY) 2026 core CPI forecast, lifting it to the 2.5% - 3.0% range.
A CPI print in line with or above expectations next week would reinforce the case for a 25 bp rate hike to 1% as early as June. Any meaningful downside surprise, however, could revive talk of delayed tightening and weigh on the yen.
Japan core CPI chart
US: Q1 2026 earnings season
US first‑quarter (Q1) 2026 earnings season continues next week with a solid lineup of reports from major technology, retail and consumer names. Highlights include:
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