Global financial markets moved lower on Tuesday as investors reacted to stronger-than-expected US inflation data and rising geopolitical tensions in the Middle East. Concerns surrounding persistent inflation, elevated energy prices and uncertainty around monetary policy contributed to a broader risk-off tone across equities, bonds and currencies.
The S&P 500 and Nasdaq ended lower, with technology and consumer discretionary shares leading declines, while more defensive sectors such as healthcare and consumer staples outperformed. Investors also weighed signs of a stabilising labour market after ADP data showed modestly firmer private-sector hiring, reinforcing the view that economic conditions remain resilient despite tighter monetary policy.
US inflation data dampens expectations for rate cuts
The latest US inflation figures showed consumer prices rising by 3.8% year-on-year in April 2026, exceeding market expectations of 3.7% and marking the highest inflation reading since May 2023.
Energy prices continue to drive inflation higher
A significant increase in energy costs was the primary driver behind the latest inflation surge. Energy prices jumped 17.9%, with gasoline and fuel oil prices recording notable gains as oil markets remained volatile due to geopolitical tensions surrounding the Strait of Hormuz.
Core inflation, which excludes food and energy prices, also edged higher to 2.8%, reinforcing concerns that underlying price pressures remain elevated. CPI increased 0.6% month-on-month, signalling persistent price pressures despite easing monthly momentum.
Federal Reserve likely to keep rates higher for longer
Following the inflation release, investors scaled back expectations for near-term Federal Reserve rate cuts. Treasury yields rose across the curve, with the 10-year US Treasury yield climbing towards 4.46%.
Markets now see few cuts this year, with some investors even pricing in the possibility of a December rate hike. The US dollar strengthened against major currencies as rising yields and inflation concerns supported demand for the greenback.
Equity markets struggle amid rising global risks
Global stock markets weakened as investors adopted a more cautious stance in response to inflationary pressures and geopolitical uncertainty.
US markets close lower
The S&P 500 and Nasdaq both ended Tuesday’s session in negative territory, led lower by declines in technology and consumer discretionary shares.
More defensive sectors, including healthcare and consumer staples, outperformed as investors shifted towards lower-risk assets amid heightened volatility.
European markets under pressure
European equities declined sharply, with the STOXX 50 falling 1.4% and the STOXX 600 losing 1.1%.
Banks, insurers and industrial companies were among the weakest performers, including Santander, BNP Paribas, ING, Munich Re, Siemens Energy, Prosus and ASML. Higher oil and gas prices added further pressure to the region’s inflation outlook.
Asian markets deliver mixed performance
Asian equities traded mixed on Wednesday, with most markets remaining in tight ranges amid concerns over the Iran conflict and inflation risks.
South Korea’s KOSPI index outperformed, rising 1.4% led by chipmakers SK Hynix and Samsung. However, sentiment towards the country’s technology sector remained fragile after policy discussions around redistributing AI-related profits unsettled investors and contributed to weakness in semiconductor shares globally.
Japan’s equity market also advanced on strength in technology shares, while Chinese and Hong Kong markets traded mostly flat ahead of the anticipated Trump-Xi summit. Australia underperformed due to weakness in the banking sector.
Oil prices remain elevated amid Middle East tensions
Energy markets remained a key focus for investors as geopolitical developments continued to support oil prices.
Brent and WTI crude remain elevated
Brent crude traded above $107 per barrel, while WTI crude remained near $102 after three consecutive sessions of gains.
Although oil prices eased slightly during Asian trading on Wednesday, ongoing disruption risks in the Strait of Hormuz and fading hopes for a lasting ceasefire between the US and Iran continued to support prices.
Stronger dollar adds pressure on global markets
The US dollar remained firm above the 98 level following the stronger inflation report. EUR/USD traded around 1.1735, while sterling weakened amid ongoing political uncertainty in the United Kingdom.
The stronger dollar and rising bond yields contributed to tighter financial conditions globally, adding further pressure to equity markets.
Gold eases as yields rise
Gold prices edged lower as investors balanced geopolitical tensions against the prospect of persistently higher global interest rates and rising bond yields.
Semiconductor and AI stocks remain in focus
Nvidia CEO to join Trump’s China visit
Reports that Nvidia CEO Jensen Huang will accompany Donald Trump during his visit to China improved sentiment in after-hours trading.
Investors are monitoring the visit closely for potential progress on semiconductor trade restrictions and market access for US technology firms operating in China.
Samsung shares fall on strike risks
Samsung Electronics shares dropped more than 5% after wage negotiations with its largest labour union collapsed, increasing the possibility of an 18-day strike later this month.
Workers are reportedly seeking higher bonuses linked to the company’s AI chip profits as competition intensifies with SK Hynix.
Corporate movers and analyst updates
Several companies experienced notable share price movements following earnings releases, analyst upgrades and takeover developments.
Sea Limited surges on strong revenue growth
Sea Limited shares jumped 13% after reporting stronger-than-expected fourth-quarter revenue of $7.1 billion, driven by solid growth in its gaming division Garena.
Although earnings per share missed forecasts, investors focused on improved growth momentum and easing concerns over profitability.
eToro beats profit expectations
eToro exceeded Wall Street first-quarter profit expectations, supported by a 71% rise in trading contribution to $166 million as commodities trading activity surged sharply.
Commodities accounted for 60% of commissions during the quarter, while adjusted earnings rose to $0.91 per share, above forecasts of $0.73. Despite the strong results, shares fell 3%.
Brown-Forman rejects takeover offer
Brown-Forman rejected a $32-per-share cash takeover offer from Sazerac despite ongoing consolidation pressures across the alcohol industry.
The proposed $15 billion deal followed failed merger talks with Pernod Ricard and comes amid weaker alcohol consumption trends and softer valuations across the spirits sector.
Boeing reports strongest order start since 2014
Boeing booked 135 net new aircraft orders in April, taking year-to-date orders to 284, marking its strongest start to a year since 2014.
However, the company continues to trail Airbus in total orders and faces ongoing certification delays affecting widebody aircraft deliveries.
eBay rejects GameStop takeover approach
eBay rejected a $56 billion takeover proposal from GameStop, describing the offer as neither credible nor attractive due to financing concerns.
Investors remain sceptical about the proposal given GameStop’s smaller market valuation and reliance on debt and equity funding.
Mexico outlook revised to negative
S&P Global Ratings revised Mexico’s outlook to negative from stable, citing weak growth, rising government debt and limited fiscal flexibility.
The agency warned that continued support for state energy firms Pemex and CFE could place further pressure on public finances, although Mexico’s sovereign credit rating was affirmed at BBB.
Broadcom and MongoDB receive positive analyst ratings
Citi reiterated a Buy rating on Broadcom and raised its price target to $500, citing strong AI-driven growth from major customers including Google and Meta.
MongoDB was also upgraded by Citi, with analysts highlighting increasing demand linked to AI applications, Atlas usage growth and expanding workloads from AI coding tools.
Lowe’s upgraded by Citi
Citi upgraded Lowe’s to Buy from Neutral while maintaining a $285 price target, citing market share gains and resilient DIY demand relative to Home Depot.
The bank said the home improvement sector may have bottomed, supported by potential interest rate cuts and easing macroeconomic pressures.
Salesforce faces growth concerns
Salesforce saw its price target reduced to $188 from $200 by Citi due to slower deal activity, longer sales cycles and increasing competition from HubSpot and Adobe.
Analysts also highlighted concerns surrounding Tableau weakness and slower adoption of Agentforce AI products.
Luxury sector gains support from Barclays
Barclays upgraded LVMH to Overweight and Kering to Equal Weight, citing restructuring-led growth opportunities and improving brand momentum.
The bank expects recovery at LVMH through Tiffany and Dior, alongside margin expansion at Kering driven by Gucci cost reductions.
Deutsche Bank initiates coverage on EssilorLuxottica
Deutsche Bank initiated coverage on EssilorLuxottica with a Hold rating and a €183 price target following weaker-than-expected first-quarter results.
Analysts highlighted macroeconomic risks tied to Middle East tensions as well as rising competition in AI-enabled eyewear from Alphabet and Apple.
Upcoming economic events investors are monitoring
Wednesday’s agenda includes US producer price index (PPI) inflation data, EIA oil inventory reports, Federal Reserve speakers and a 30-year Treasury bond auction.
Corporate earnings from Cisco Systems, Siemens, Allianz and Deutsche Telekom are also expected to provide further insight into business conditions, inflationary pressures and global demand trends.
This information is provided solely for educational and informational purposes and should not be construed as investment advice, advice on specific investments or investment decisions, tax advice, legal advice, or any other form of professional or regulatory advice. The information does not take into account your personal circumstances and is provided to you on the express understanding that it does not constitute advice and should not be relied upon in making any investment decision. Investing in financial instruments involves risk. You should conduct your own research before making any investment decisions and seek the assistance of a licensed financial advisor if you are unsure. No person should act on any opinion or information contained in this document without first obtaining appropriate professional advice. Calamatta Cuschieri Investment Services Limited does not accept liability for any actions, proceedings, costs, demands, expenses, damages, or losses suffered as a result of reliance on the information herein.
