Inflation bites and yields surge
This week @ 1500 Friday 15th May in London.
Markets:
- FTSE 100 fell 0.5% this week to 10,182, as rising gilt yields and renewed energy price pressures weighed on domestic-facing stocks.
- S&P 500 rose 1.4% this week to 7,501, supported by resilient corporate earnings and optimism early in the week around US-Iran peace negotiations, though gains pared on Friday as Treasury yields hit one-year highs.
- Nasdaq Composite fell 0.3% this week to 26,175, as rising yields acted as a headwind for rate-sensitive technology valuations, offsetting continued strength in AI-linked names.
- Euro Stoxx 50 fell 0.6% this week to 5,040, reflecting broader European caution amid sticky inflation and an on-hold ECB.
Bonds:
- UK 10 year gilt yields rose 29 basis points this week to 5.17%, reflecting persistent inflationary pressure from elevated energy costs and rising concern that the Bank of England faces a prolonged hold.
- US 10 year Treasury yields rose 21 basis points this week to 4.58%, reflecting hotter-than-expected April CPI data and growing market speculation around a possible Fed rate hike later in 2026.
Commodities:
- Brent crude rose 7.2% this week to $108.57/bbl, supported by continued Middle East tensions and uncertainty over progress in US-Iran negotiations following President Trump’s meetings with President Xi.
- Gold fell 4.1% this week to $4,537.90/ozt, as a sharp rise in real yields and a firmer dollar reduced safe-haven demand.
- Copper was broadly flat this week at $6.31/lbs, driven by offsetting forces of resilient US industrial data and concerns over demand prospects if inflation remains elevated.
FX:
- GBP/USD fell 2.1% this week to 1.3352, as the dollar strengthened on rising rate-hike expectations following the elevated US inflation print.
- EUR/GBP rose 0.7% this week to 0.8708, as sterling underperformed amid weaker UK risk sentiment and higher gilt yields.
Macro:
- US April CPI rose 3.8% year-on-year, the highest rate since May 2023, with energy accounting for over 40% of the monthly increase. US April PPI rose 6.0% annually.
- UK CPI was 3.3% in March (April data due 20th May). The Bank of England held rates at 3.75% at its 30th April meeting, citing Middle East-related uncertainty.
- Jerome Powell’s term as Federal Reserve Chair ended on 15th May. Kevin Warsh, confirmed by the Senate on 13th May, takes the chair. Markets are now pricing a 45% probability of a Fed rate hike in 2026.
- The ECB left its deposit rate unchanged at 2.0% at its 30th April meeting. The ECB’s next decision is 11th June.
- The Empire State Manufacturing Index rose sharply to 19.6 in May from 11.0 in April, well above expectations.
- Middle East conflict remains unresolved. Trump-Xi meetings concluded without confirmed progress on an Iran ceasefire, reigniting energy price risk.
Companies:
- HSBC reported Q1 2026 pre-tax profit of $9.5bn, ahead of analyst expectations of $7.8bn. The bank approved a first interim dividend of 10 US cents per share and held its AGM on 8th May.
- AstraZeneca announced a $50bn US investment programme through 2030, including a new manufacturing facility in Virginia and R&D facilities in Massachusetts. The company reported Q1 revenue up 10% to $13.6bn, with EPS up 34% year-on-year.
- Shell reported Q1 results last week, noting weaker trading and production in its integrated gas division.
What we will be keeping an eye on next week…
w/c 18th May 2026
- UK April CPI (ONS, 20th May)
- US April housing starts and building permits (19th May)
- FOMC minutes from the 29th April meeting (20th May)
- Nvidia Q1 FY2027 earnings (20th May, after market close)
Markets move constantly and the numbers in this update will change. This is a snapshot only, pulled together from a range of sources, and is meant as a quick guide rather than a precise record. It’s not investment advice and shouldn’t be used to make trading or investment decisions. If you need more accurate or specific data over a defined period, please get in touch with a member of the team who will be happy to help.
Important Information
This article is for information only and does not constitute advice or recommendation and you should not make any investment decisions based on it. The views and opinions of this article are those of Casterbridge at the time of writing and may change without notice. Any opinions should not be viewed as indicating any guarantee of return from investments managed by Casterbridge nor as advice of any nature. It is important to remember that past performance and the value of an investment, and any income from it, may go down as well as up and the investor may not get back the original amount invested.