Market Report.
📈 The US Consumer Price Index jumped 0.6% in April, pushing the annual rate to 3.8% — the largest 12-month increase since May 2023. The rise was broad-based, with energy alone accounting for over 40% of the monthly gain.
🛢️ Energy costs surged 3.8% on the month, driven by the Iran conflict pushing oil above $100 a barrel. Gasoline rose 5.4% (up 28.4% annually), while diesel and jet fuel saw even steeper hikes, squeezing transportation and supply chains.
🔍 Excluding food and energy, core CPI rose 0.4% (the most since January 2025), lifting the annual core rate to 2.8%.
💸 Middle class: For the first time in three years, inflation devoured all wage gains. Real average hourly earnings fell 0.5% in April and dropped 0.3% from a year ago. Record-low consumer sentiment and warnings of “stagflation lite” cloud the outlook
🏦 The hot inflation data, with core PCE inflation estimated to hit 3.4% annually, locks the Federal Reserve into holding rates steady well into 2027. Markets have begun pricing a 30% chance of a rate hike, dimming any near-term prospect of cuts.
📉 The impact on the bond market.
💬 The bond market treated April’s 3.8% CPI as a minor blip, betting that energy driven inflation will quickly fade and the Fed will not need to hike rates. but what if they’re wrong?.
📊 Yields barely moved on CPI day, and fed funds futures still imply no rate hikes in 2026. A Bloomberg Economics model projects May CPI could hit 4.2 percent. The worst of the inflation surge may not be behind, and the reckoning for consumers and markets could still be coming in the months ahead.
⛽ Oil futures have not fully priced in the scale of supply disruptions, so gasoline prices could remain elevated through the summer driving season even if the Strait of Hormuz reopens.
🇩🇪 Inflation hits also Germany.
📈 Germany’s annual inflation rate edged up to 2.9 percent in April, from 1.9% in February and March, according to data confirmed Tuesday by the Federal Statistics Office. The March figure had stood at 2.8 percent. The measure used for comparison with other European Union nations, harmonised consumer price gains, slightly exceeded the previous month’s level.
🇫🇷 France could also be in trouble.
🏦 The Bank of France says the French economy has so far absorbed the Middle East conflict shock but rising uncertainty and higher energy costs are starting to test resilience.
🏭 Business activity expanded in April, based on a survey of 8,500 firms, but the pace slowed versus earlier. Industry, especially defence-linked areas (aeronautics, electrical equipment, electronics), remained a key support; construction growth eased and services stalled.
🚚 Fuel exposed services (notably transport and logistics) are seeing squeezed margins.
✈️ Trump’s trip to China:
🗣️ Trump said he will discuss Washington’s longstanding support for Taiwan’s defense; Beijing has urged the U.S. to scale back security commitments and reaffirmed firm opposition to Taiwan independence.US media warn any U.S. softening on Taiwan could embolden China and destabilize the island’s autonomy; Beijing views Taiwan as the biggest bilateral risk. Taiwan’s legislature approved a $25 billion special defense budget to buy U.S. missiles and weapons, below the $40 billion sought.
📰 One thing is certain, Trump will likely seek to generate major headlines from his visit to China in an attempt to reverse the current perception of failure surrounding the military campaign against Iran. Announcements of commercial agreements — such as aircraft orders for Boeing or new financial and technological cooperation deals — would undoubtedly be well received.
⚖️ However, the central issue remains Iran.
🤝 The Trump administration is expected to seek backing for a peace deal with Iran—one shaped on U.S. terms. That approach is likely to meet measured, diplomatically cautious responses from some capitals.
🌐 China is Iran’s primary customer and has invested heavily in the country, particularly in key infrastructure projects such as railway lines and the international airport. Beijing regards Iran as a strategic partner within its Belt and Road Initiative (BRI) and as an important node in its broader vision of global trade connectivity. China is well aware that its interests are closely aligned with those of Iran, and therefore it is unlikely to favour a decisive Iranian defeat at the hands of the United States.
🧭 At the same time, deeper US involvement in the Middle East limits Washington’s ability to focus more fully on Asia and counter Chinese strategic interests. For example, the United States redeployed certain missile defence systems from South Korea in order to reinforce allied positions in the Middle East.
🚫 Marc Rubio is prohibited from entering China, but there will be an exemption.
📝 In July 2020, China imposed sanctions and an entry ban on Rubio in direct retaliation for his strong criticism of China’s policies. The sanctions include a travel ban preventing entry into China and a freeze on any assets in China, though he had none.
✈️ Rubio is currently traveling to Beijing from May 13 to 15, 2026, as part of President Trump’s official state visit, the first U.S. presidential trip to China in nearly a decade.
🔓 China has explicitly said it will not block him from entering on Air Force One with Trump. Beijing used a quiet workaround by altering the Chinese character used to transliterate his name, a change diplomats say was done specifically to technically sidestep the old ban.
🏅 This makes Rubio the first sitting U.S. Secretary of State under active Chinese sanctions to visit China.
💰 Expensive dome for America.
🏗️ Originally dubbed the Iron Dome for America, Trump pitched the Golden Dome during the 2024 campaign as a quick, cheap solution to be operational by 2029.
📉 The Congressional Budget Office (CBO) estimates a notional missile defense system matching Trump’s executive order would cost roughly 1.2 trillion dollars over 20 years. Acquisition costs alone surpass 1 trillion dollars, with the massive space-based interceptor satellite layer eating up about 70 percent of that sum.
💬 Trump announced a 175 billion dollar cost in May 2025, and the Pentagon later cited 185 billion dollars, creating a vast gap between rhetoric and fiscal reality.
⚠️ The CBO warns that even a 1.2 trillion dollar system would fail to fully counter a large-scale attack from Russia or China. Analysis cited suggests around 7,800 satellites would be required, incurring massive launch, maintenance, and replacement expenses due to orbital drag.
📉 Trump is losing political strength to the midterm elections:
📊 Trump’s job rating slumped to 34%, the lowest of his presidency. Only 27% approve of his economic handling, and just 22% think he’s doing a good job lowering the cost of living—the top voter concern.
🔻 His economic advantage has evaporated. For the first time, Democrats now narrowly lead Republicans (32% to 28%) on the question of which party has the better economic plan. Trump’s tariffs and the Iran war reversed the price relief he promised on Day 1.
🚫 Voters note he started a costly foreign war instead of avoiding one, that immigration raids ensnared non-criminal workers, and that he blocked the release of the Epstein files. Only 38% of Americans still believe he “keeps his promises,” down from 51% after the election.
🌍 Political earthquake in the UK.
🏛️ Prime Minister Keir Starmer was holding an emergency cabinet meeting yesterday morning as his premiership rests on a knife-edge. Cabinet ministers reportedly told him to plan his exit from Downing Street, and more than 70 Labour MPs have called on him to quit.
📉 The local elections held on 8 May resulted in the Labour Party losing more than 1,100 council seats. The main beneficiary? The meteoric rise of the architect of Brexit, Nigel Farage, leader of Reform UK, who is capturing protest votes from a British electorate increasingly frustrated by rising taxation, declining public service quality, and an immigration policy that is becoming unpopular among working‑class voters.
📉 As a reminder, UK economic growth forecasts for 2026 have been revised down three times — from an initial 1.4% to 1.1%, with the IMF projecting 0.8%. Some research teams estimate that growth could fall as low as 0.3% in 2026 should the Strait of Hormuz remain closed until year‑end.
⚖️ The government faces two principal challenges: reducing the deficit and containing public debt. These pressures stem largely from the after‑effects of Covid and the war in Ukraine, both of which have inflicted significant economic damage across Europe — where similar structural weaknesses remain visible.
📈 Political turbulence pushed gilt markets into heightened volatility yesterday, with yields moving approximately 80 basis points. For comparison, the Liz Truss mini‑budget crisis triggered moves of roughly 200 basis points, while Black Wednesday in 1992 — when sterling exited the European Exchange Rate Mechanism — caused a bond market impact of around 150 basis points in a single day.
🗣️ London Mayor Sadiq Khan told CNBC he is not calling for a change of Prime Minister but warned Labour is in danger of losing the next general election pretty badly. He also said the party should commit to rejoining the EU, calling Brexit the biggest act of economic self-harm any country has ever done.
🏢 Corporate World news:
📜 Greg Brockman wrote to Elon Musk in January 2018 that OpenAI’s biggest tool was the moral high ground and their fiduciary duty should be to humanity. He argued against merging the nonprofit lab with Tesla, saying it would be a setback.
⚖️ Musk is suing co-founders Sam Altman and Greg Brockman, claiming they stole a nonprofit from him. He seeks their removal, up to 134 billion dollars in damages, and a reinstatement of the old nonprofit structure that would derail OpenAI’s plan to go public at a trillion dollar valuation.
🎭 The trial has made both Musk and the OpenAI founders look motivated by self interest rather than altruism. The moral high ground Brockman once invoked now appears gone, as the courtroom drama exposes greed and power struggles.
👨⚖️ On the witness stand, Musk portrayed his entire career as a series of altruistic endeavors. He claimed he never loses his temper and does not yell at people, then proceeded to lose his temper during cross examination about evidence he only worried about OpenAI’s privatization once he could not own most of it.
🤖 Musk and Altman have pivoted from warning about mass job losses to promising an AI driven future of amazing abundance and universal high income.
💼 The trial unfolds as both OpenAI and Musk’s xAI race to raise record sums amid fierce public resistance to all things AI. A recent poll found registered voters viewed AI less favorably than almost any other politician or topic, with only the Democratic Party and Iran scoring worse.
Market view.
📉 US futures experienced corrections yesterday following the inflation data, which has raised concerns about the possibility of further rate hikes — or at least diminished hopes of imminent rate cuts.
📈 E‑mini S&P 500 futures have recovered part of yesterday’s losses and are currently trading at 7,435.
📈 Nasdaq 100 futures have followed a similar pattern and are now standing at 29,315.
💵 The US dollar index (DXY) continues to strengthen, rising to nearly 98.50, putting significant pressure on major currency pairs. EUR/USD has fallen sharply, slipping below 1.1715 and moving towards the 1.1700 support level.
📉 In Europe, futures such as the DAX 40 initially attempted to extend yesterday’s declines but are currently stabilising around 24,180.
📈 Euro Stoxx 50 futures have managed to hold support at 5,800 and are rebounding, trading near 5,830.
🛢️ Oil prices climbed above $108.40 per barrel (spot Brent) during yesterday’s session, reflecting tensions between the United States and Iran. However, prices have eased in recent hours to around $106.50 per barrel.
🥇 Gold futures are moving sideways around $4,715 per ounce, having displayed several zigzag movements throughout the week.
🪙 Finally, Bitcoin continues to hold above the $80,000 level, trading close to $81,000.
