Markets
Yesterday’s global market price action lacked a clear, unique narrative resulting in erratic-like trading throughout the session. Headlines on the conflict in the Middle-East/Iran again were far from consistent. President Trump announcing an end to (escalating) hostilities between Israel and Iran and hinting at a deal over the next days initially eased tensions. However, later in US dealings, headlines on the US responding to a reported Iran attack on a US helicopter once again illustrated the fragility of the ceasefire and persistent nervousness (and probably) mutual distrust on the way to a deal. This, together with lingering tech/AI uncertainty weighed on US equities. US indices closed mixed (Dow +0.17%, Nasdaq -0.97%) admittedly off the intraday lows, but the picture still looks fragile. (Nasdaq struggling not the fall below the 25.700 support area.) Interestingly, the headlines again had only limited impact on the oil price (Brent close near $91.5 p/b). In this context, the tentative risk-off also had no negative impact on bond markets. US yields even eased between 4.6 bps (5- & 10-y) and 3.9 bps (30-y). A $58 bln 3-y Treasury auction was ok, but with limited impact on the daily market dynamics. US eco data mostly were second tier (weak NFIB small business confidence), but with only limited impact on yield markets as they looked forward to today’s US CPI data. German yields in a similar move declined between 3.8 bps (2-y) and 0.2 bps (30-y). A mixed story for the dollar as well. After setting an intra-day low early in US dealings, the headlines on the helicopter incident and building risk-off reverted intraday USD-losses. DXY closed marginally lower in a daily perspective near 99.9. EUR/USD gained marginally, but off the intraday highs (close 1.1543). The yen struggles with USD/JPY holding a tight range north of USD/JPY 160.
Major Asian equity indices (Japan, China, Japan and South Korea) mostly trade in negative territory, but there are exceptions (Australia, India,…). US yields gain 1-2 bps. The dollar also eases slightly (DXY 99.9, EUR/USD 1.155). Aside from (often noisy) headlines on the developments in the Iran conflict, the market focus is on US May CPI inflation data. Consensus sees headline inflation at 0.5% M/M and 4.2 Y/Y and core at 0.3% M/M and 2.9% Y/Y, in line with our KBC model nowcast. A combination of last week’s strong US activity data and inflation moving even further away from the Fed inflation target probably will keep the debate on Fed tightening alive. In this context, a big negative surprise is probably needed to backtrack on the rise in US yields. In theory, this also should favour the dollar, especially if it would coincide with a more fragile risk sentiment (US triggering a global tightening of financial conditions?) Later today, a $39 bln 10-y US Treasury auction will be an interesting pointer for investor appetite for US bond with longer maturities.
News & Views
Chinese inflation came in below expectations in May with headline price pressures matching April’s 1.2% instead of accelerating to 1.3%. A core gauge decelerated to 1.1% from 1.2%. It marks a stark contrast with rising producer price inflation. May PPI shot up from 2.8% to 3.9%, the quickest since July 2022. Details showed intensifying pressures in mining, raw materials and manufacturing (i.e. the early stages of the supply chain), revealing the impact coming from the Iran war. But weak domestic demand is preventing companies from pass-through to the end-consumer, resulting in a muted CPI print. The latter was also heavily supported by gasoline prices (up 23.5% y/y) and travel prices (4.3%). Bloomberg calculated that without those, May CPI would have risen by just 0.5%. Food prices fell 1.7% and services inflation eased from 0.9% to 0.8%.
The Energy Information Administration (EIA) is projecting further record in US power consumption in 2026 and 2027 after already hitting its second straight annual record high in 2025. The surge is in large part driven by data centers dedicated to AI and cryptocurrency, the agency said. The EIA expects that the electricity demand increase in the commercial sector will cause it to outpace residential demand in 2026 in what would be the first time ever. The EIA also said that the share of power generation from coal will slide from 17% last year to 16% and 15% in 2026 and 2027. Natural gas’ share is expected to hold at 40% in 2026-2027, the same as in 2025. Renewable energy generation meanwhile will rise from 24% last year to 27% in 2027. Nuclear power fills the remaining gap (18%).
 hostilities between Israel and Iran and hinting at a deal over the next days initially eased tensions. However, later in US dealings, headlines on the US responding to a reported Iran attack on a US helicopter once again illustrated the fragility of the ceasefire and persistent nervousness (and probably) mutual distrust on the way to a deal.){kind=link}