Key Takeaways
- Global equity markets extended their relief rally as optimism over a potential US-Iran peace agreement boosted risk appetite, triggering strong gains in Asian and US stock indices while crude oil prices continued to retreat.
- Japan’s softer-than-expected April inflation data reduced pressure on the Bank of Japan to tighten monetary policy aggressively, reinforcing Yen weakness and widening the policy divergence versus the hawkish Federal Reserve.
- Cooling bond yields and easing geopolitical tensions provided fresh support for growth and technology stocks, while improving labour relations at Samsung Electronics helped reduce concerns over semiconductor supply-chain disruptions.
- Chart of the day: Nikkei 225 kickstarts new bullish impulsive up move sequence towards new all-time highs above 61,955 key short-term support.
Top Macro Headlines
- US-Iran peace deal reaches “in progress”: Global market sentiment shifted gear to “risk on” dramatically after Iran said the latest proposal from the US has partly bridged the gap between them, increasing the odds of a peace deal.
- Japan April CPI cools to 4-year low: Japan’s core consumer price index, which excludes fresh food but includes energy, rose 1.4% year-on-year in April, coming in softer than market forecasts of 1.7%. Also, the Bank of Japan’s preferred inflation data, the core-core CPI, excluding fresh food and energy, rose at a slower pace of 1.9% y/y versus 2.4% in March. This reading marked the lowest level since July 2024 and fell below the Bank of Japan’s 2% target, largely due to government fuel subsidies offsetting the Iran war oil shock.
Key Macro Themes
- Geopolitical “risk on” volatility unlocked: Capital markets are actively pricing out the prolonged geopolitical risk premium. The temporary pause in Middle East military escalation has triggered immediate short-covering across multiple asset classes, especially boosting airlines and tech while tanking crude oil.
- Diverging central bank paths: While the Fed minutes signal potential rate hikes due to sticky US inflation, the Bank of Japan finds itself with renewed breathing room. Japan’s unexpectedly soft 1.4% y/y core CPI and 1.9% y/y core-core CPI prints suggest less urgency for immediate aggressive tightening, despite the ongoing weakness of the Yen.
- The billion-dollar tech IPO thaw: Led by SpaceX seeking a $1.75 trillion public footprint and OpenAI moving into confidential prospectus filings, the multi-trillion-dollar tech listings boom is shifting structural market liquidity back toward equities.
Global Market Impact: Last 24 Hours
Equities: Global equities experienced a massive relief rally. Wall Street rallied for the second consecutive session, with a fresh all-time closing high seen in the Dow Jones Industrial Average. The energy sector lagged, down 1%.
Fixed Income: Sovereign bond yields pulled back, providing much-needed relief from the recent historic debt selloff. The benchmark US 10-year Treasury yield slid for the second consecutive session by 1 bps to 4.57%, and the longer-term 30-year yield fell by 3 bps to 5.09%.
FX: The US Dollar Index, DXY, traded almost unchanged on Thursday, 21 May, capped by renewed risk-on appetite. The Japanese Yen faced depreciation pressure following the softer-than-expected Japan CPI data, as it probed the 159.10/35 per USD level that may trigger verbal intervention.
Commodities: WTI and Brent crude oil saw losses for the second consecutive session, dropping by 1.1% and 0.2% on Wednesday, 21 May, as the geopolitical risk premium from the Middle East conflict evaporated on peace hopes. Meanwhile, spot Gold traded almost unchanged at $4,543/oz, below its 20-day moving average at $4,611/oz.
Asia Pacific Impact
- Stock markets: Benchmark Asia Pacific stock indices kick-start today’s session on a bullish footing, reinforced by overnight gains seen in the US stock market. Nikkei 225 rose 1.8%, Hang Seng Index gained 0.5%, KOSPI rose 0.5%, ASX 200 added 0.4%, and STI advanced 0.2% at the time of writing.
- Currencies and monetary policy: The Indonesian Rupiah caught a significant bid and strengthened after Bank Indonesia implemented an interest rate hike to defend the currency. Conversely, Japan’s unexpectedly soft CPI data gives the Bank of Japan breathing room, further complicating efforts to defend the Yen from speculative short selling.
- Corporate and supply chain: Providing a major tailwind for regional tech, the Samsung union officially suspended its planned strike after reaching a tentative pay deal, easing severe risks to global semiconductor and memory supply chains.
Top 3 Events to Watch Today
- UK Retail Sales (Apr) – 2.00 pm SGT; consensus: 1.3% y/y, Mar: 1.7% Impact: GBP/USD, GBP crosses, FTSE 100
- US University of Michigan Consumer Sentiment Final (May) – 10.00 pm SGT Impact: USD, US stock indices
- Updates on US-Iran peace deal Impact: All asset classes
Chart of the Day: Nikkei 225 En Route to Fresh All-Time High
Fig. 1: Japan 225 CFD minor trend as of 22 May 2026. Source: TradingView.
The recent bullish reversal seen on the Japan 225 CFD, a proxy of the Nikkei 225 futures, after a break below and a reintegration back above its 20-day moving average on Wednesday, 20 May 2026, has suggested that a new potential bullish impulsive up move sequence is underway towards new record highs.
Watch the 61,955 key short-term pivotal support to maintain the bullish bias. A clearance above the current all-time area of 63,270/788 sees the next intermediate resistances coming in at 65,010/040 and 66,190/558, Fibonacci extension clusters.
On the other hand, a break and an hourly close below 61,955 invalidates the bullish scenario, potentially leading to a minor corrective setback to retest the 20-day moving average at 60,985. Further weakness is possible, with potential to extend towards the next intermediate support at 59,048/58,574.
