Morning Wrap - Slight Malaise Creeps Into the Market (12.05.2026)

Asian Markets and Futures Situation

• The Asian session is trading in a somewhat downbeat mood following a strong rebound during yesterday's session. South Korea's KOSPI index is pulling back from historical highs as doubts emerge regarding the continued rally of semiconductor stocks.
• Declines across Asian and Oceania indices are limited to under 0.5%. US futures are seeing a minor retreat—US500 is down less than 0.2%, while US100 is trading 0.4% lower.

Geopolitics: USA, Iran, and China

• Trump is reportedly considering a return to bombing Iran due to a lack of progress in nuclear negotiations. However, no major decisions are expected before Trump's upcoming visit to China.
• Some US officials doubt that Pakistani negotiators are fully conveying Trump’s stance. Additionally, they are allegedly presenting more favorable terms for Iran, which is driving a desire within the US for direct negotiations. The White House remains divided on the prospect of further military operations in Iran.

FX Market and the Bank of Japan

• The Yuan continues to strengthen. The onshore Yuan was set at its highest level against the dollar since March 2024.
• Scott Bessent traveled to Japan, where the first two hours of talks with Finance Minister Katayama focused on excessive Yen weakness, critical minerals, and AI. Meanwhile, USDJPY has returned to the 157.5 area, significantly offsetting the impact of recent interventions.
• The Summary of Opinions from the Bank of Japan's latest meeting indicates that interest rate hikes remain on the table, particularly given that Japan still maintains some of the lowest real interest rates in the world.

Changes at the Fed (Federal Reserve)

• Kevin Warsh will likely be announced today as a new member of the Board of Governors for a 14-year term. Tomorrow, a final vote is expected on his candidacy for Fed Chair (for a 4-year term). Jerome Powell is scheduled to step down as Chair this coming Friday.

Commodities

• JP Morgan is warning of oil reaching $150 per barrel and inflation hitting 4%. According to the bank, supply fell in April by nearly 14 million barrels per day (bpd), while demand dropped by just over 4 million bpd. Interestingly, this represents nearly double the demand destruction seen during the 2008 financial crisis, even though the current $100 price is less detrimental to the global economy than it was 18 years ago.
• Oil prices are rising slightly on Tuesday morning, May 12, following sharp gains at the start of the week. Brent is trading just below $105, while WTI is approaching $99 per barrel.
• NATGAS saw a strong rebound during yesterday's session following US heatwave forecasts, which are expected to drive up demand.
• Gold is seeing a minor pullback but remains above $4,700 per ounce. Similarly, Bitcoin is down slightly by 0.7% but is maintaining its level above $81,000.
• EURUSD is losing ground during the Asian session, erasing the entire rebound from Monday's opening session, though it remains above 1.1750.

Macroeconomic Data and Corporate News

• Australia’s NAB Business Conditions index fell to 3 (previously 6). While not a primary indicator for Australia, it could potentially signal a pause in further rate hikes in the coming months.
• The Information reports that OpenAI could save up to $97 billion by 2030 following a recent deal with Microsoft to loosen their partnership. Combined revenues from the distribution of OpenAI solutions are expected to be capped at $38 billion.
• Alphabet plans its first-ever sale of yen-denominated bonds worth several billion dollars. The proceeds are earmarked for AI infrastructure projects with a projected value of $190 billion.

Economic Calendar

• Today at 14:30 CET, the US CPI inflation data will be released. Market expectations sit at 3.7% y/y and 0.6% m/m.