Oil prices fell 5% at the market open. US stock indices hit new records again

The Dow Jones Index (US30) rose by 0.58% for the day and 2.22% for the week. The S&P 500 (US500) gained 0.37% for the day and 0.79% for the week. The NASDAQ Index (US100) closed 0.42% higher, bringing its weekly increase to 0.81%.

The S&P 500 completed its eighth consecutive week of gains, the strongest streak since late 2023, while the Dow Jones reached a new all‑time high. Investor optimism was supported by comments from Secretary of State Marco Rubio about progress in peace negotiations with Iran, which eased concerns about geopolitical escalation despite persistent disagreements between the parties. The positive trend was reinforced by strong corporate news and earnings results. The computer‑hardware sector outperformed thanks to developments at China’s Lenovo, with Dell shares hitting a record high and HP Inc. surging more than 15%.

The Mexican peso consolidated around 17.3 per US dollar. The domestic economic backdrop remains difficult: revised data showed that Mexico’s GDP contracted by 0.6% quarter‑on‑quarter in the first quarter, with only a symbolic annual increase of 0.2%. Although inflation slowed to 4.1% in the first half of May, it remains above the central bank’s target. Pressure on the currency intensified after international rating agencies downgraded their assessments. Moody’s lowered Mexico’s sovereign rating to Baa3, while S&P Global Ratings revised the outlook on its BBB rating to negative, highlighting growing investor concerns about economic resilience.

The Canadian dollar is being shaped by a complex mix of external market forces and expectations for domestic indicators. CAD shows strong sensitivity to equity‑market performance: its inverse correlation with the S&P 500 is around 0.45 lower, meaning that risk‑sensitive assets like CAD tend to weaken when stocks fall. Contrary to traditional assumptions, CAD’s sensitivity to WTI oil prices remains low, with a correlation of about 0.20, likely because the global inflation shock from high energy prices outweighs Canada’s export advantages. After a 0.6% annualized contraction in the fourth quarter of 2025, the economy has returned to growth according to outlooks and preliminary data, with GDP expected to rise by 1.5-1.7% in the first quarter of 2026. The key interest rate stands at 2.25%, and swap markets are almost unanimous that the Bank of Canada will leave it unchanged at the June 10 meeting.

On Friday, Germany’s DAX rose by 1.15% for the day and 4.43% for the week. France’s CAC 40 gained 0.37% for the day and 3.24% for the week. Spain’s IBEX 35 added 0.06% for the day and 2.89% for the week. The UK’s FTSE 100 closed 0.22% higher for the day and 2.66% for the week. As of late May 2026, Eurozone financial markets remain highly sensitive to inflation data and geopolitical risks. The probability of a June rate hike by the European Central Bank (ECB) is estimated at above 85%. Swap markets have fully priced in two rate increases and assign roughly a 50% probability to a third, reflecting hawkish investor expectations. Eurozone GDP growth expectations for 2026 have been revised downward to 0.9%, creating a difficult dilemma for the ECB: it must fight high inflation without triggering a deeper downturn in the private sector, where business activity is already weakening according to May PMI data.

On Monday, WTI crude oil prices plunged about 5%, falling to around 91 dollars per barrel. The oil market continued its sharp decline from last week amid clear progress in diplomatic contacts between Washington and Tehran. The potential reopening of the Strait of Hormuz is critical for the global economy, as roughly 20% of global crude‑oil and LNG shipments pass through this corridor. Restoring free navigation would return massive volumes of stored oil to the market, providing major relief for Asia’s largest importers (China, Japan and India) and could trigger further price declines.

In Asia on Friday, Japan’s Nikkei 225 rose by 2.68% for the day and 3.33% for the week. China’s FTSE China A50 increased by 0.68% for the day but fell 0.53% for the week. Hong Kong’s Hang Seng gained 0.86% for the day but declined 0.90% for the week. Australia’s ASX 200 rose by 0.41% for the day and 0.92% for the week.

Next Tuesday, investor attention will focus on the Reserve Bank of New Zealand meeting, where the official cash rate is expected to remain at 2.25%. The key event will be the updated economic predictions and the interest‑rate path. This is especially important because the RBNZ’s February projections diverged significantly from market expectations, which currently price in a rate hike in July and a total of 75 basis points of tightening by the end of 2026. Given global instability and inflation risks, markets will scrutinize any signal of readiness for more aggressive action.

The Australian dollar (AUD) remains heavily influenced by its strong correlation with the US dollar and equity markets. Its dependence on the dollar Index is extremely high, with an inverse correlation of 0.80 down, making AUD highly sensitive to global macroeconomic sentiment. Even more concerning is the extreme inverse correlation with US two‑year Treasury yields at 0.83 lower, a historical record, meaning any Fed tightening immediately pressures the Australian currency. After three rate hikes this year, market expectations remain hawkish. Although the next RBA meeting is scheduled for June 15-16, futures markets have fully priced in another rate increase, with a 50% probability of a fifth hike by year‑end. This week’s key event will be the April inflation report. While the March spike to 4.6% year‑over‑year may not repeat, Bloomberg’s consensus expects a 0.6% monthly increase, which would slow the annual rate to 4.4%.