Market drivers and catalysts
- Equities: US equities reached fresh records on AI optimism, Europe softened on energy concerns, while Asia slipped on renewed Middle East tension.
- Volatility: VIX higher, payrolls week, JOLTS today
- Digital Assets: Bitcoin at seven-week low, IBIT weaker than ETHA, miners outperform.
- Commodities: Crude oil swings on headlines, gold reclaims USD 4,500, corn leads grain market lower
- Fixed Income: US bond yields soften following Monday’s crude and ISM-led spike
- Currencies: Dollar pauses; USDJPY nears 160 despite record Japanese FX intervention efforts
- Macro: Eurozone May CPI & US April JOLTS Job Openings
Macro headlines
- Iran halted contacts with Washington after Israeli strikes in Lebanon and is weighing with allies closing the Strait of Hormuz and Bab el-Mandeb. Trump says talks continue and a deal on Hormuz could come within a week. Lebanon wants any extended Hezbollah–Israel ceasefire to cover all its territory.
- US ISM Manufacturing beat expectations in May, but prices paid stayed above 80 for a second month, the first time since the post-Covid period, underscoring sticky inflation.
- Canada’s manufacturing PMI held in growth at 52.9 in May, just below April’s 53.3. Output, new orders, and employment rose on stronger demand, but input and output prices neared four-year highs, supply chains were hit by Middle East disruptions, and business confidence stayed subdued.
- US construction spending rose 0.4% m/m in April 2026, its second straight increase and above expectations, lifting the y/y gain to 0.9%. Private and public spending both rose 0.4%, with single-family housing up 1.4% while multi-family and private non-residential dipped.
- Germany’s manufacturing PMI was revised up to 50.1 in May 2026 from 49.9, signaling near-stagnation and a four-month low, as new orders fell, prices saw their biggest rise since June 2022, output growth slowed, job cuts deepened, and business expectations stayed muted but slightly improved from April.
- Switzerland’s GDP grew 0.4% q/q in Q1 2026, below the 0.5% estimate. Industrial output rose on stronger manufacturing, but chemicals and pharma slumped, pulling goods exports down. Services growth was modest, with gains in transport and finance offset by weaker trade, retail, and tourism. Domestic demand was flat, as higher government spending was offset by lower investment, and imports fell on soft demand.
- Germany’s retail sales fell 0.3% m/m in April 2026, their fourth straight decline but slightly better than forecasts. Non-food and online sales dropped sharply, while food sales rose 3.2%. On the year, sales were down 0.2%, pointing to weak consumer demand despite easing inflation.
Macro calendar highlights (times in GMT)
0830 – UK April Mortgage Approvals
0900 – Eurozone May CPI
1400 – US April JOLTS Job Openings
Earnings this week
- Monday (yesterday): Hewlett Packard Enterprise
- Tuesday (today): Palo Alto Networks, Dollar General, Ulta Beauty
- Wednesday: Broadcom, Inditex, CrowdStrike, Medtronic, Veeva Systems
- Thursday: Ciena, Lululemon Athletica
For all macro, earnings, and dividend events check Saxo’s calendar.
Equities
- USA: US equities closed higher again, with the S&P 500 rising 0.3% to 7,599.96, the Nasdaq gaining 0.4% to 27,086.81 and the Dow Jones adding 0.1% to 51,078.88 as investors balanced higher oil prices against renewed AI enthusiasm. NVIDIA jumped 6.3% after unveiling new AI-focused PC chips at Computex, while IBM gained more than 7% on optimism around its AI and quantum positioning. Salesforce climbed nearly 10% as investors rotated back into software and AI-linked names, while airlines and utilities lagged as Brent crude moved sharply higher on fresh Iran-related uncertainty. Markets now shift focus toward US payrolls data later this week and whether higher oil prices begin leaking back into inflation expectations.
- Europe: European equities traded softer, with the STOXX 600 falling around 0.8% as investors reassessed energy risks and geopolitical uncertainty after a strong May rally. Energy stocks outperformed as oil prices climbed, while travel and industrial names lost ground on concerns that a prolonged Middle East disruption could pressure costs and consumer demand. ASML remained relatively resilient as AI-related semiconductor demand stayed supportive, while luxury and airline stocks weakened on slower risk appetite. UK equities held up slightly better thanks to defensive exposure and commodity-linked companies. Attention now turns to Eurozone inflation data and any signs the European Central Bank may stay hawkish for longer.
- Asia: Asian equities weakened on Tuesday as renewed fighting in the Middle East overshadowed AI optimism and pushed oil prices higher. Japan’s Nikkei fell around 1.6%, South Korea’s Kospi dropped roughly 1.7%, while Hong Kong’s Hang Seng outperformed with gains of about 1.0% as Chinese technology shares remained relatively firm. Taiwan Semiconductor Manufacturing Company and regional chip suppliers saw profit-taking after a strong rally, while South Korean technology names came under pressure amid rising inflation concerns. Chinese markets were steadier as investors continued to focus on policy support and AI-linked growth themes.
Volatility
- Volatility edged higher on Monday, but markets remain far from a risk-off environment. The VIX rose 4.77% to 16.05 while the S&P 500 gained 0.26%, finishing at 7,599.96 and remaining close to record highs. Investors are increasingly focused on this week’s economic calendar, with US JOLTS job openings today, followed by ADP employment, ISM Services, the Beige Book, jobless claims, and Friday’s Nonfarm Payrolls report, all of which could influence expectations for Federal Reserve policy and bond yields.
- Based on SPX options pricing, the market is currently implying an expected move of approximately ±76 points, or ±1.0%, by Friday’s close.
- Today's 0DTE skew indicator remains relatively balanced near current market levels, although put options remain modestly more expensive than equivalent calls further below the market, suggesting some continued demand for downside protection without signalling elevated stress.
Digital Assets
- Digital assets remain under pressure as institutional outflows and geopolitical uncertainty continue to weigh on sentiment. Bitcoin fell to around $70,200, its lowest level in more than seven weeks, while Ethereum traded just below $2,000.
- Spot Bitcoin ETF flows remain a key focus after several weeks of heavy withdrawals, with IBIT falling 2.7% on Monday, compared with a more modest 0.6% decline for ETHA.
- Investors are also digesting news that Strategy sold a small portion of its Bitcoin holdings for the first time since 2022, although the sale represented only a tiny fraction of its overall position.
- Major altcoins were broadly weaker, with XRP (-2.2%) and Solana (-2.1%) declining alongside Bitcoin. Crypto-related equities showed a mixed picture, with Coinbase and MicroStrategy under pressure, while mining companies including MARA, RIOT, and CleanSpark outperformed.
Commodities
- Crude oil continues to trade from one headline to the next, making it increasingly difficult for traders to maintain conviction beyond a few hours. On Monday, prices posted their biggest one-day gain in a month after rebounding from a six-week low when Iranian officials reportedly halted negotiations with the US in protest over Israel's expanded military operations in Lebanon. President Trump later sought to calm markets by insisting talks remained ongoing and that he had spoken with Israeli Prime Minister Netanyahu, although the two sides offered differing accounts of the conversation. Beneath the headline-driven volatility, global energy markets continue to tighten, with the main focus remaining on the Strait of Hormuz, a vital shipping artery that remains effectively shut, sustaining concerns about supply disruptions and elevated energy prices.
- Gold continues to take its cues from the oil market given crude's influence on inflation expectations and, by extension, interest rates, bond yields and the dollar. The metal came under pressure on Monday as oil prices surged and stronger-than-expected US ISM manufacturing data temporarily pushed Treasury yields higher. While the report's Prices Paid component remained elevated, it came in slightly below expectations, helping to temper some inflation concerns. Since then, gold has recovered to trade back above USD 4,500. However, from a technical perspective, the metal remains in a short-term downtrend, with a break above USD 4,630 needed to signal a more constructive outlook and potentially attract fresh momentum buying.
- Grain markets remain under pressure, with corn falling to fresh multi-week lows, down 9% in the last month, and wheat trading near a one-month low as favorable US growing conditions, strong South American harvest prospects and ample global supplies continue to weigh on prices. Soybeans have also softened amid good crop prospects and subdued demand from China. While grains have at times tracked movements in crude oil due to their role in biofuel production, supportive weather conditions and comfortable supply expectations are currently proving the dominant market drivers.
Fixed Income
- US Treasuries came under pressure on Monday as crude oil prices reversed sharply higher and the May ISM Manufacturing report surprised to the upside, with the prices paid component remaining above 80 for a second consecutive month, underscoring persistent inflation pressures.
- The benchmark 2-year Treasury yield climbed more than six basis points to nearly 4.09% before easing back to around 4.02%, while the 10-year Treasury yield rose to almost 4.52%. During the Asian session, however, the 10-year yield retreated to 4.43% as a pullback in oil prices helped ease some near-term inflation concerns.
- Looking ahead, bond traders will continue to monitor developments in energy markets alongside key US economic releases, including the May ISM Services survey on Wednesday and the May nonfarm payrolls report on Friday.
- In Japan, government bond yields fell after a strong auction of 10-year bonds attracted robust demand from investors seeking elevated yields. The benchmark 10-year JGB yield dropped as much as 10 basis points to 2.59%, having reached a near three-decade high of 2.8% last month, the highest level since 1996.
Currencies
- The US dollar edged lower in early Tuesday trading after strengthening on Monday as oil prices surged and US ISM manufacturing data came in stronger than expected. Overall, the moves have remained relatively contained, with EURUSD trading near 1.1640 after an intraday swing from 1.1665 to 1.1610 on Monday.
- The Japanese yen continued to weaken, with USDJPY rising to 159.67 and once again approaching the psychologically important 160 level. Attention remains focused on Japan's willingness to defend the currency after details released on Friday showed the Ministry of Finance spent nearly JPY 12 trillion (USD 74 billion) on recent intervention efforts. Given the limited and short-lived impact on the exchange rate, markets may increasingly question how willing the Takaichi government is to continue relying on direct intervention rather than addressing the underlying policy divergence that continues to weigh on the yen.
