ETO Markets Buzz | US Data Strengthens as Inflation Pressure Tests Equity Resilience

Global Market Overview | May 2026

According to ETO Markets analysis, global markets are balancing renewed optimism around US-China engagement with stronger-than-expected US economic data and persistent inflation pressure. Sentiment improved after the latest meeting between Washington and Beijing, which investors viewed as a sign that tensions may stabilise in the near term.

At the same time, US data continued to surprise to the upside. Inflation accelerated to 3.8% year on year from 3.3%, while the Producer Price Index surged 6%, well above the 4.7% forecast. Retail sales rose 4.9%, industrial production increased 1.4%, and manufacturing production gained 1.3%, all exceeding expectations. This reinforces the view that the US economy remains resilient, but also complicates the policy outlook.

Inflation Pressure Rebuilds

US inflation reached its highest level since May 2023, driven largely by energy costs linked to the Iran-related oil shock. Energy prices rose 17.9% year on year, with gasoline and fuel oil leading the increase.

Core inflation also moved higher to 2.8% from 2.6%, exceeding expectations. Producer price pressure was even stronger, with core PPI rising to 5.2% from an upwardly revised 4.0%, driven by final demand trade services, transportation, and warehousing costs. These data suggest upstream inflation may continue feeding into consumer prices.

Consumers and Industry Stay Resilient

Despite restrictive rates, US consumers remain strong. Retail sales rose 4.9% year on year, the strongest annual gain since August and above the long-term average of 4.74% since 1993. This suggests household spending continues to support growth.

Industrial data also remained solid. Industrial production rose 0.7% in April, the strongest monthly gain in 14 months, while manufacturing output increased 0.6%. Durable goods production rose 1.2%, led by a 3.7% jump in motor vehicles and parts. Capacity utilisation also increased to 76.1%, pointing to continued demand across the production sector.

Fed Faces Higher-for-Longer Pressure

The latest data show an economy expanding rather than moving toward recession. However, the same resilience creates a challenge for the Federal Reserve. Strong demand, elevated producer prices, and geopolitical uncertainty all point to inflation staying above target for longer.

This may force interest rates to remain restrictive for longer than markets previously expected. For companies, higher borrowing costs and persistent input pressure could gradually weigh on margins and profit growth.

AI Optimism Supports Equities

Global equity markets have remained relatively resilient despite macro pressure. Much of that support comes from continued optimism around artificial intelligence infrastructure spending and strong guidance from major technology companies.

That optimism will face an important test this week with NVIDIA earnings. Investors increasingly view NVIDIA as a key bellwether for AI demand, semiconductor momentum, and broader technology sentiment.

Australia and Global Data in Focus

In Australia, NAB Business Confidence improved to -24, better than the -32 forecast, although sentiment remains weak. The Reserve Bank of Australia raised rates by 25 basis points to 4.35%, reflecting ongoing inflation concerns and resilient domestic activity.

Markets will also watch the Federal Reserve meeting minutes after a decision that included three dissents, highlighting internal divisions over inflation and interest rates. Key US indicators, European confidence and PMI data, UK inflation and labour figures, China‘s industrial production, retail sales, housing, fixed asset investment, and Japan’s first-quarter GDP will shape the next phase of global expectations.

Outlook

Looking ahead, ETO Markets expects inflation data, Federal Reserve communication, US-China developments, AI earnings momentum, and geopolitical risk to remain the key drivers of market direction. The US economy remains stronger than expected, but that strength also increases the risk that policy stays restrictive for longer.

In this environment, ETO Markets continues to emphasise close monitoring of inflation trends, corporate margins, AI-driven equity leadership, and cross-market signals. Equity resilience remains supported by technology optimism, but elevated valuations and sticky inflation leave markets sensitive to any shift in policy expectations.

Disclaimer

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