ETO Markets Buzz | US Resilience Meets Inflation Risks Persist

Global Market Overview | May 2026

According to ETO Markets analysis, global markets are balancing renewed optimism around US-China talks with stronger US economic data, persistent inflation pressure. Equity markets moved higher on hopes that trade tensions may stabilise, while technology sentiment remained supported by strong corporate earnings, including Nvidia‘s headline beat and Lenovo’s stronger results.

However, the broader macro backdrop remains uneven. US inflation rose to 3.8% year on year, while the Producer Price Index climbed 6%, both above expectations. Retail sales rose 4.9%, industrial production increased 1.4%, and manufacturing production gained 1.3%, reinforcing the view that the US economy remains resilient despite high rates and geopolitical uncertainty.

US Inflation Stays Sticky

Inflation pressure remains the central constraint for markets. April CPI reached its highest level since May 2023, supported by energy costs linked to the Iran-related oil shock. Energy prices rose 17.9% year on year, while core inflation increased to 2.8% from 2.6%.

Producer prices also accelerated sharply. Core PPI rose to 5.2% from an upwardly revised 4.0%, driven by final demand trade services, transportation, and warehousing costs. This suggests upstream cost pressure may continue passing through to consumer prices.

US Growth Remains Resilient

Consumer and industrial data continue to show strength. Retail sales rose 4.9% year on year, above the 3.3% forecast and stronger than the long-term average of 4.74%, suggesting household spending remains a key support for growth.

Industrial production rose 0.7% month on month, the strongest gain in 14 months. Manufacturing output increased 0.6%, while durable goods production rose 1.2%, led by motor vehicles and parts. Capacity utilisation also edged higher to 76.1%, pointing to continued demand across the production sector.

Policy and Earnings Stay in Focus

The Federal Reserve remains under pressure as strong activity and sticky inflation reduce the scope for policy easing. Markets are also pricing a potential 25-basis-point rate increase, with the probability around 55%.

Equity resilience remains supported by AI optimism and strong corporate earnings, but the next test will come from Nvidia and broader technology guidance. At the same time, markets will watch US PCE inflation, PMI surveys, consumer sentiment, housing data, and global releases from Europe, China, Japan, Canada, and Brazil.

Australia Adds Policy Pressure

Australia also remains in focus. NAB Business Confidence improved to -24, better than the -32 forecast, but sentiment remains weak. The Reserve Bank of Australia raised rates by 25 basis points to 4.35%, reflecting persistent inflation pressure and resilient domestic activity.

Australias labour market softened, with unemployment rising to 4.5% from 4.3%. This suggests higher rates are gradually weighing on activity, even as inflation keeps policy restrictive.

Outlook

Looking ahead, ETO Markets expects inflation data, US-China developments, AI earnings momentum, Middle East tensions, and central bank communication to remain the dominant drivers of market direction. The US economy remains stronger than expected, but that strength also raises the risk that interest rates stay restrictive for longer.

Equity markets remain supported by AI optimism, but sticky inflation, weak consumer sentiment keep markets sensitive to any shift in macro pricing.

Disclaimer

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