Morning Wrap (18.05.2026)

🌍 Geopolitics

• Peace talks between the US and Iran have reached an impasse. Trump posted a warning on Truth Social that “the clock is ticking” for Tehran and that “nothing will remain” if Iran does not act quickly — the markets interpreted this as an increased likelihood of renewed military action.

• Drones have struck a nuclear facility in the United Arab Emirates, and Trump is set to convene a meeting in the Situation Room on Tuesday to discuss military options against Iran. The first meeting with security advisers took place on Saturday.

• Against the backdrop of US-China tensions, the Trump-Xi summit resulted in China announcing it would purchase at least $17 billion worth of US agricultural products annually until 2028 (including soya and beef), whilst the US secured a commitment regarding rare earths. However, the two sides presented differing accounts of the agreements.

📊 Economy

• Data from China for April was a major disappointment: retail sales rose by just 0.2% y/y (the weakest performance since December 2022; forecast: 2%), industrial production slowed to 4.1% y/y (forecast: 5.9%), and fixed asset investment contracted by 1.6% y/y over the first four months of the year.

• Prices of new homes in China fell for the 35th consecutive month, whilst domestic car sales plummeted by 21.6% year-on-year (the seventh consecutive monthly decline). The NBS described the external environment as “gloomy and complex”, calling for a more proactive fiscal policy — but the Politburo did not announce any new stimulus measures.

• Japan has confirmed plans to issue new debt to finance a supplementary budget aimed at mitigating the energy impact of the conflict in the Middle East. Prime Minister Takaichi instructed the finance minister to examine options for an expanded package, which contributed to Japanese bond yields rising to their highest level since 1996.

📉 Global markets

• Wall Street ended last week in the red, and Monday’s Asian session saw widespread falls. Rising oil prices, higher bond yields and escalating geopolitical tensions combined to create a ‘toxic cocktail’ for global equity markets.

• The yield on 10-year Treasuries rose to 4.631% — the highest level since February 2025 — whilst 30-year yields hit an annual high of 5.159%, reflecting a repricing of expectations regarding further interest rate hikes in the face of the energy shock.

🌏 Asia

• The KOSPI (South Korea) triggered the ‘sidecar’ mechanism for the second time in a row (a mechanism to control algorithmic trading on the stock exchange), falling by as much as 4.68% during the session, although it eventually recovered its losses and closed above zero. Tensions are being exacerbated by a wage dispute at Samsung Electronics — the trade union has entered government-mediated negotiations to avoid a strike at the company, which accounts for almost 25% of South Korean exports.

• The JP225 (Nikkei) is down by around 1.27%, trading at around 61,032 points. Japanese government bond yields are rising to levels not seen since 1996, against a backdrop of plans for a new bond issue and stagflationary pressures from higher energy prices.

• The Chinese CHN.cash index is down 0.27% to around 8,583 points, whilst the UK100 index is down 0.27%. European futures are pointing to a lower opening: DAX –1%, CAC –0.95%, FTSE MIB –0.8%, FTSE 100 –0.2%.

💱 Currencies

• The USD is currently the strongest major currency, outperforming the CHF and the EUR. The AUD and JPY are the weakest — the AUD is falling on the back of disappointing data from China, Australia’s main trading partner.

• USDJPY is up +0.23% to around 158.98, reflecting pressure on the JPY despite rising JGB yields. USDPLN is up +0.21% to 3.6556, while EURPLN is up +0.08% to 4.2487. The DXY (USDIDX) is up a symbolic +0.04% to around 99.25, remaining close to the psychological 100 mark.

🛢️ Raw materials

• WTI crude oil has jumped by +1.89% to around $107.57 per barrel, whilst Brent has surpassed $111 per barrel (+1.90%), driven by Trump’s harsher rhetoric towards Iran, a drone attack in the UAE and concerns over the navigability of the Strait of Hormuz.

• Natural gas is up 2.33% to $3.03 — the day’s best-performing asset. Gold is down slightly (-0.20%) to around $4,536/oz, whilst silver is down 1.32% to around $75.22/oz, reacting to rising bond yields and a stronger dollar.

📱 Companies

• Ryanair is releasing its results today before the markets open. Baidu (BIDU.US) is also reporting before the opening bell, with the focus on the impact of energy costs and the state of Chinese consumer spending on its advertising revenue.

• NVIDIA (NVDA.US) is set to report its quarterly results on Wednesday after the market closes. The consensus forecast is for EPS of $1.78 and revenue of approximately $78.98 billion; the share price has risen by 20% over the past month and by 26.5% year-to-date, reaching all-time highs. 

• On Wednesday, TJX, Target and Lowe’s (major retail chains) will also report their results, while on Thursday Walmart (before the market opens) and Take-Two Interactive (after the market closes) will do the same. Strong results from Walmart would serve as a test of the US consumer’s resilience in the face of rising energy costs.

₿ Crypto

• Bitcoin is down 1.71% to around $76,909 — its lowest level in over two weeks. A decline in risk appetite amid geopolitical tensions, a spike in bond yields and weak data from China has driven capital away from speculative assets.

🔭 What to watch out for today

• At 09:00, Swiss GDP for Q1; at 14:00, Polish core inflation for April.

• The key question of the day: have European markets already priced in the geopolitical risk, or will the opening see a further sell-off? Tuesday’s meeting in Trump’s Situation Room could be a potential catalyst for increased uncertainty.