Week commencing
25 May 2026

Markets rise as US–Iran tensions ease; softer jobs data lifts ASX 200

United States (US) equity markets are poised to finish the week higher after a solid rebound in the second half. Renewed optimism around US–Iran peace talks helped ease geopolitical tensions and pushed oil prices lower, relieving pressure on both inflation expectations and risk assets.

Closer to home, ASX 200 is also on track to finish the week in positive territory after a volatile start. The local market took its lead from Wall Street and received an extra boost from a softer‑than‑expected Australian jobs report.

While a slowing labour market is unwelcome news for job seekers, it is positive for ASX 200. This is because it reduces the likelihood of further aggressive Reserve Bank of Australia (RBA) rate hikes this year, welcome relief given the index’s heavy weighting toward interest rate‑sensitive sectors such as financials, real estate and consumer discretionary.

The week that was: highlights

• The US National Association of Home Builders (NAHB) housing market index rose to 37 in May, beating expectations of 35 and marking the strongest reading since late last year
• Pending home sales climbed 1.4% month‑on‑month (MoM) in April, ahead of the 1.0% consensus forecast
• The Federal Open Market Committee (FOMC) minutes showed a majority of officials open to some policy firming if inflation remains sticky, though the overall tone was relatively balanced
• Initial jobless claims fell by 3000 to 209,000 for the week ending 9 May
• S&P Flash manufacturing purchasing managers’ index (PMI) surged to 55.3, above the 53.8 forecast and marking its strongest reading since May 2022
• Turning to China (CN), industrial production slowed more than expected to 4.1% year‑on‑year (YoY) in April, while retail sales rose just 0.2% YoY, well below the 2.0% consensus
• China’s new home prices across 70 cities fell 3.5% YoY in April, marking a 34th consecutive month of contraction
• Japan’s (JP) preliminary first‑quarter (Q1) gross domestic product (GDP) surprised to the upside, expanding at an annualised 2.1% rate versus the 1.7% expected
• Japan’s core inflation rate for April eased to 1.4% YoY from 1.8%
• In Australia (AU), Westpac consumer confidence rose 3.5% in May to 83, rebounding from the previous month’s decline and beating forecasts
• The April employment report showed a fall of 18,600 jobs, well below the expected gain of 15,000. More significantly, the unemployment rate rose to 4.5% from 4.3%, the highest level since November 2021
• West Texas Intermediate (WTI) crude oil fell 3.28% to $97.72
• The US dollar index (DXY) fell 0.05% to 99.22
• Bitcoin gained 0.06% to $77,460
• Gold fell 0.17% to $4532
• Wall Street’s gauge of fear, the volatility index (VIX), fell to 16.75 from 18.42 the previous week.

Key dates for the week ahead

Australia & New Zealand

• AU – Inflation: Wednesday, 27 May at 11.30am AEST
• NZ – Reserve Bank of New Zealand (RBNZ) interest rate decision: Wednesday, 27 May at 12.00pm AEST
• NZ – RBNZ press conference: Wednesday, 27 May at 1.00pm AEST
• NZ – ANZ business confidence: Thursday, 28 May at 11.00am AEST

China & Japan

• JP – Bank of Japan (BoJ) Governor Ueda speech: Wednesday, 27 May (time TBA)
• JP – Industrial production MoM preliminary: Friday, 29 May at 9.50am AEST
• CN – National Bureau of Statistics (NBS) manufacturing PMI: Sunday, 31 May at 11.30am AEST
• CN – NBS non‑manufacturing PMI: Sunday, 31 May at 11.30am AEST

United States

• US – Conference Board (CB) consumer confidence: Wednesday, 27 May at 12.00am AEST
• US – Core personal consumption expenditures (PCE) price index: Thursday, 28 May at 10.30pm AEST
• US – Durable goods orders MoM: Thursday, 28 May at 10.30pm AEST
• US – GDP growth rate quarter‑on‑quarter (QoQ) (second estimate): Thursday, 28 May at 10.30pm AEST
• US – Initial jobless claims: Thursday, 28 May at 10.30pm AEST
• US – Personal income and spending MoM: Thursday, 28 May at 10.30pm AEST

Europe & United Kingdom

• EA – Economic sentiment: Thursday, 28 May at 7.00pm AEST
• UK – Nationwide house prices MoM and YoY: Friday, 29 May at 4.00pm AEST

Key events for the week ahead

AU: inflation

Date: Wednesday, 27 May at 11.30am AEST

Last month’s consumer price index (CPI) data delivered a notable jump, with headline inflation rising to 4.6% YoY n the 12 months to March 2026 – the highest reading since September 2023. Housing, which is the highest weighted group in the CPI, was the largest contributor to annual inflation, with a rise of 6.5%. This was followed by an 8.9% rise in transport, where automotive fuel prices surged 32.8% from February to March – the largest monthly increase since the series began in 2017. Importantly for the Reserve Bank of Australia (RBA), its preferred measure – the trimmed mean – held steady at 3.3%, still well above the bank’s 2% – 3% target midpoint.

The RBA responded just days later by lifting the cash rate 25 basis points (bp) to 4.35%, its third consecutive 25 bp rate hike. In the statement, the board sounded hawkish, noting that developments in the Middle East were already adding to inflation and warning of potential second‑round effects.

In the accompanying press conference, Governor Bullock sounded more dovish and emphasised that the three rate hikes delivered this year had given the board more ‘space’ to assess how growth and inflation respond to the energy supply shock and tighter policy. Wednesday’s April CPI print will therefore be in very sharp focus, particularly after this week’s softer‑than‑expected jobs report for April.

At this early point, the market expects headline inflation to rise again towards 5%, with the trimmed mean likely to nudge higher to 3.4%. A hotter‑than‑expected outcome would strengthen the case for further RBA tightening.

The Australian rates market is currently pricing in 2 bp of tightening for the RBA’s board meeting in June, with a total of 29 bp of hikes priced for all of 2026.

AU All groups CPI and trimmed mean chart

NZ: RBNZ interest rate decision

Date: Wednesday, 27 May at 12.00pm AEST

At its April meeting, the RBNZ held the official cash rate (OCR) steady at 2.25% by consensus. The committee acknowledged that developments in the Middle East had materially altered the outlook, pushing near‑term inflation higher while weakening the economic recovery. It noted inflation is now forecast to peak around 4.2% in the June quarter before gradually returning toward the 2% midpoint over time, and reiterated it stands ready to act if inflationary pressures become more generalised.

Looking ahead to next week’s full Monetary Policy Statement, the RBNZ is widely expected to leave the OCR unchanged at 2.25% once again. Markets will focus heavily on updated forecasts and the tone of the statement as the bank balances persistent imported inflation risks against softer domestic demand and spare capacity in the economy.

The New Zealand rates market is pricing in 5 bp, or roughly a 20% chance of a 25 bp rate hike next week. There is a cumulative 80 bp of RBNZ rate hikes priced for 2026.

RBNZ official cash rate chart

US: core PCE price index

Date: Thursday, 28 May at 10.30pm AEST

Last month, the Federal Reserve’s (Fed) preferred inflation gauge – core PCE – rose to 3.2% YoY in March, the highest level since late 2023 and up from 3.0% the prior month.

At the last FOMC meeting in late April, the Fed kept rates unchanged but delivered its most divided vote since 1992. Governor Miran pushed for a rate cut, while several policymakers dissented hawkishly. The minutes showed a majority of officials open to some policy firming if inflation remains sticky, but the committee stopped short of a clear hawkish pivot.

Thursday’s April core PCE release will be one of the most important US data points of the week. With oil prices still elevated, consensus expects the reading to rise to 3.3% YoY. A stronger‑than‑expected print would increase the likelihood of a rate hike.

The US rates market is currently pricing in 23 bp of tightening by December.

US core PCE price index chart

CN: NBS manufacturing PMI

Date: Sunday, 31 May at 11.30am AEST

China’s official NBS manufacturing PMI inched down to 50.3 in April from March’s 12‑month high of 50.4 but still beat expectations of 50.1. It marked the second consecutive month of expansion, though at a noticeably softer pace. The slowdown was driven by the oil shock hitting energy‑intensive sectors, continued weakness in consumption, and further softening in the property market.

May’s reading will be closely watched for signs of whether the recent loss of momentum is stabilising or deepening. Consensus expects the index to print around the 50.3 – 50.5 level. A further softening would add to concerns around China’s uneven recovery, while a solid print would help stabilise the outlook. Investors will also be looking for early signs that the oil shock is beginning to fade and whether export strength in electric vehicles (EVs), machinery and technology products can continue to offset domestic weakness.

NBS manufacturing PMI chart

US: Q1 2026 earnings season

US Q1 2026 earnings season is in the home stretch, with reports scheduled from companies including CrowdStrike, Broadcom and C3.ai.