May Market Recap: US Jobs, Middle East Developments and UK Retail Gains

Markets

Following a strong US jobs report on Friday, geopolitical tensions early in the weekend kept bond yields under upward pressure. A surge in mutual military actions between Iran and Israel highlighted the complexity of achieving and sustaining a ceasefire in the regional conflict. Brent crude rose from its Friday close near $93 per barrel to approach $98 per barrel in European trading, which helped US yields and other major yields hold their gains from the day. News regarding the Iran‑Israel conflict softened as President Trump urged both parties to cease hostilities, prompting oil prices to retreat to around $94 per barrel. The modest rebound in markets reflected the view that any resolution to supply‑chain disruptions remains distant, making a reversal of the Friday rally unlikely. US yields rose by 1.5 basis points on the 2‑year and 4 basis points on the 30‑year, keeping the 2‑year, 10‑year, and 30‑year rates well above the psychological levels of 4%, 4.5%, and 5%, respectively. German yields increased by 1.4 basis points on the 2‑year and 2.2 basis points on the 10‑ and 30‑year notes. The Nasdaq rebounded 0.86% after Friday’s decline, though the decline was not fully erased. The dollar’s rebound faced resistance, preserving most of Friday’s gains; the DXY closed above 100 at 100.05. EUR/USD steadied near 1.1535 after testing the 1.15 level, while USD/JPY remained close to the 160 threshold amid ongoing speculation about potential intervention by Japanese authorities.

Asian equity markets were mostly higher this morning, with South Korea’s Kospi leading gains after a rebound from last week’s decline. Brent crude slipped back to around $93 per barrel. US yields fell modestly, by about one basis point across the curve, while the dollar also weakened, with EUR/USD at 1.1545. Economic data scheduled for the day includes second‑tier releases such as US NFIB small‑business confidence, ADP weekly employment numbers, and US trade statistics. Later, the US Treasury is expected to commence its monthly refinancing operation, offering a $58 billion issuance of three‑year notes. Apart from geopolitical headline risk stemming from the Middle East, investors are awaiting tomorrow’s US consumer price index. An unexpected rise in CPI could strengthen expectations of a Federal Reserve rate hike, potentially bolstering the dollar and reducing the correlation between the dollar and oil prices. In Hungary, attention is focused on May inflation figures, which will inform the National Bank of Hungary’s assessment of the scope for a gradual easing of policy following recent improvements in domestic risk premia.

News & Views

The NY Fed’s consumer survey showed that the one‑year‑ahead inflation expectation fell by 0.1 percentage points to 3.5% in May, while the three‑year and five‑year expectations stayed steady at 3.1% and 3%, respectively. Outlook on future credit availability weakened, with fewer respondents believing credit will be easier to obtain over the next year, though views on current credit access were largely unchanged. Regarding employment, 43.7% of respondents said it was likely they would lose their job and find a new one, down 2.3 percentage points from the 12‑month average and the lowest level since December 2025. The probability of actually losing a job rose by 0.5 percentage points to 15.1%, above the 12‑month trailing average of 14.4%.

Retail sales in the United Kingdom rose 3.7% in May, according to the British Retail Consortium. The increase— the strongest since April 2025—far exceeded the 0.8% forecast and followed a 3% decline in April. The BRC chief executive noted that a heatwave spurred demand for outdoor and summer items, leading to a rebound in clothing and footwear as shoppers bought sandals, sunglasses, fans, lighter bedding, and outdoor toys. Food sales also rose, boosted by bank‑holiday barbecues. Overall, both food and non‑food categories posted gains that reversed April’s dip, and same‑store sales climbed 3.4% after a comparable decline the previous month.

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