Fra Danske Bank:
Sofie Grundvad Pedersen, [email protected] , Assistant Analyst
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Focus will continue to be on developments in the Middle East and the bond market rout that has caused a sell-off in risk assets.
In Sweden, the Origo inflation expectations will be published. Given the clear focus on the credibility of the inflation target in last week’s Riksbank minutes these are particularly interesting, even though the significance of the smaller survey for money market participants should not be overstated.
Overnight Japan’s Q1 GDP figures will be released. Both the Tankan business survey and PMIs indicate the economy was on a reasonably solid footing in Q1, although the service sector has since slowed while remaining in expansionary territory.
During the week, notable releases include UK CPI inflation for April and the minutes from the Federal Reserve’s April meeting on Wednesday, as markets look for further guidance after the divided rate decision. On Thursday, attention turns to flash PMIs for the US, euro area and UK. The week concludes on Friday with euro area negotiated wage data and Japanese inflation.
Economic calendar
Chinese data for April were weak across the board. Retail sales dropped from 1.7% y/y to 0.2% y/y (cons: 1.9% y/y) and industrial production slipped from 5.7% y/y to 4.1% y/y (cons: 6.0% y/y). Investment growth fell back into negative at -1.3% y/y ytd from 1.7% y/y ytd in March. Home prices kept declining, though at a slightly slower pace, with new home prices down 0.19% m/m (prior: -0.21% m/m) while home sales also fell. The broad-based weakness may be related to the renewed uncertainty from the Iran war and calls for a step-up in economic stimulus. Strong 5% y/y GDP in Q1 gave some cushion for the 4½-5% target but the loss of momentum is concerning, especially as exports remain the only growth engine and face headwinds from high energy prices.
Developments in the US-Iran war continue to underscore the global economic stakes. Eurogroup President Pierrakakis warned ahead of Monday’s G7 finance ministers’ meeting that reopening the Strait of Hormuz and securing a lasting ceasefire are vital to contain energy and inflation pressures, with long-term borrowing costs already rising. Oil prices continue to climb, with brent crude reaching USD111/bbl overnight. President Trump met top national security officials on Saturday to discuss “the path forward” on Iran, later warning Tehran on social media that it “better get moving, FAST, or there won’t be anything left of them”. The IEA warns that global oil inventories are falling at a record pace towards critical levels, while new drone attacks on critical infrastructure, including the UAE’s Barakah nuclear plant, highlight growing regional security and supply risks.
In the UK , Labour’s decision to let Andy Burnham seek a return to parliament sharpens the leadership crisis facing Prime Minister Keir Starmer after heavy local election losses, which have already prompted intensified calls for him to resign. Burnham, a more left-leaning figure and favourite to challenge Starmer, must first win a tight Makerfield by-election against Reform UK. Recent GBP weakness and higher gilt yields underline market worries over potential pressure for looser fiscal policy.
The Xi-Trump meeting in Beijing on 14-15 May did not provide any surprises. Stability was highlighted as a priority and China emphasized the importance of the Taiwan issue but did not manage to change US language on the topic. Both Xi and Trump stated that the Strait of Hormuz should be open and agreed Iran should not have nuclear weapons. But it has done little to ease tensions. China agreed to buy more US agricultural goods and 200 Boeing airplanes but if anything, the trade part was underwhelming. Nevertheless, continued stability between the two nations is probably the best we can hope for and that seems to be achieved for now.
In the US, April retail sales came in on the strong side of expectations, with higher gasoline prices boosting headline nominal growth. Underlying demand also appeared firm, as the ‘core’ retail control group rose a solid 0.5% m/m SA, following a strong 0.8% gain in March. The figures point to still‑resilient consumer spending despite mounting price pressures.
Equities: Equities fell on Friday, and the tone remains weak this morning. Asian markets are lower, and US and European futures are also trading softer, as the global bond sell-off continues and oil prices extend gains amid the still unresolved Iran/Hormuz situation.
Friday’s equity session was telling. Energy was the only sector higher, supported by the move in oil, while defensive, low-volatility and value factors outperformed.
But importantly, this was not a clean stagflation trade. Materials and commodity-related equities were also sold, and both gold and silver were under pressure last week, especially on Friday.
That matters. If the market were simply pricing a stronger nominal growth environment, cyclicals and commodities should have held up better. Instead, the message from markets is more uncomfortable: this is increasingly about higher long-end yields driven by fiscal concerns, inflation risk and oil and not by growth alone.
FI and FX: Last week culminated with a broad-based sell-off in global fixed income market with e.g. US Treasuries completing the worst week in a year. This sell-off has continued overnight with e.g. 30Y US treasury yields jumping to multi-decade highs around 515bp. Notably the rise in yields has been broad based across curves and we have generally seen a modest steepening pressure in 2s10s while the 10s30s part has flattened. The negative nature behind the rise in global real rates has taken its toll on risk sensitive assets with equities posting losses equally across both cyclical- and defensive sectors highlighting the broad-based downscale in risk. Only energy has risen mirroring the continued move higher energy prices with Brent crude moving above USD 111/bbl overnight. In FX markets the reaction has been to send the USD higher while not least the CEEs, ZAR, Antipodeans, SEK and GBP have come under pressure. EUR/USD is at the time of writing trading at 1.1625 – the lowest level since “TACO-Tuesday” in early April. With most of Europe vacating Friday the opening to this session will be extra important for FI and FX markets.
See also our in-depth FI and FX morning comment *
Riksbank Minutes – May 2026 , 13 May
Global Inflation Watch – Shelter inflation boosts US CPI in April, 12 May
Research US-China – Xi-Trump meeting preview: We expect no game changers, 12 May
Spending Monitor – spending broadly unaffected by higher fuel prices , 12 May
Reading the Markets USD – Cheap USD funding, 12 May
Geopolitical Radar: The Devil is In the Details, 8 May
Weekly Focus – Higher hopes of Hormuz harmony , 8 May
Report completed: 18 May 2026, 07:00 CEST
Report first disseminated: 18 May 2026, 07:30 CEST
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