USA
The U.S. market focused heavily on inflation and labor market data last week. The May CPI report showed inflation moderating more than expected, with headline CPI up 2.3% YoY and core CPI rising just 0.2% MoM, signaling further disinflationary progress. PPI data also surprised to the downside, supporting the view that price pressures are cooling. Meanwhile, labor market data were mixed: initial jobless claims climbed to 247,000, suggesting some softening, while the unemployment rate held steady at 4.2%. The Fed is widely expected to hold rates steady at its upcoming June meeting but could lower its 2025 rate cut projections to just one cut if inflation remains sticky. Equity markets responded cautiously: the S&P 500 fell 0.3%, Nasdaq declined 0.5%, while the Dow was flat. Lower bond yields supported interest-rate-sensitive sectors late in the week, but overall sentiment remains cautious ahead of the Fed's decision.
Europe
In Europe, data continued to reflect a slowly improving but fragile economy. Eurozone inflation cooled to 1.9% YoY in May, firmly below the ECB's 2% target, while the ECB revised its forecast for inflation to fall further in 2026. First-quarter GDP was revised up to 0.6% QoQ, suggesting a better-than-expected start to the year. Industrial production in April surprised to the upside with a 2.6% MoM increase, reflecting improving manufacturing activity. However, PMI readings remained mixed, pointing to uneven sectoral recovery. The ECB’s recent policy meeting confirmed a cautious stance, signaling the end of rate hikes but remaining vigilant due to external risks, including U.S. tariff threats. The STOXX Europe 600 slipped 0.2%, while the DAX rose 0.1%, supported by better GDP and export data. FTSE 100 and CAC 40 declined 0.4% and 0.3% respectively, weighed by currency fluctuations and global trade uncertainties.
Japan
Japanese markets advanced last week on the back of improving domestic data and supportive central bank policy. First-quarter GDP was revised upward to show a smaller-than-expected contraction of 0.2% annualized, easing recession fears. Producer prices for May increased 0.2% MoM and 4.0% YoY, indicating stable input costs for businesses. The April current account surplus came in well above expectations at ¥3.68 trillion, reflecting robust external demand and stable exports. The Bank of Japan is widely anticipated to maintain its policy rate at 0.5% in its upcoming meeting while adjusting its bond tapering pace to avoid market disruptions. The Nikkei 225 rose 0.7% and the TOPIX gained 0.5%, supported by exporter optimism and a weaker yen that improved corporate earnings outlooks.
China
In China, recent economic data continued to signal fragility in the recovery. May CPI remained subdued at –0.2% YoY, while PPI fell 3.2% YoY, reflecting persistent deflationary pressures. Trade data showed mixed results, with exports rising 8.1% YoY but imports falling 0.9%, highlighting weak domestic demand. The large trade surplus of $101.3 billion provided some support to foreign reserves. Market participants remained cautious ahead of a busy data calendar following the Dragon Boat holiday, including key releases on retail sales, industrial output, and fixed asset investment. The Shanghai Composite declined 1.0% for the week, while the Hang Seng lost 1.2%, pressured by weak inflation data, capital outflows, and continued concerns over China’s property sector and regulatory environment.