U.S. inflation runs hot as Middle East risks rise

Huo Xing Finance reported on May 16 that global markets this week were hit by a combination of hotter-than-expected inflation data and intensifying geopolitical risks. U.S. April CPI and PPI both topped forecasts, pushing investors to dial back expectations for Federal Reserve rate cuts. Treasury yields jumped across the curve, with the 30-year yield breaking above 5.1% to its highest level since 2007. With Kevin Warsh formally approved as the next Fed Chair, markets have increasingly priced in a "higher for longer" rate outlook, with some positioning for the possibility of additional hikes down the road. Tensions in the Middle East remained elevated. U.S.-Iran nuclear talks were postponed, while both sides continued to issue tough messaging. Incidents involving vessel attacks in the Strait of Hormuz and changes to shipping routes kept oil prices supported, with WTI briefly topping $103. In the U.K., politics added to market volatility. After a heavy local election setback, Prime Minister Starmer faced mounting pressure inside the Labour Party, with more than 90 MPs calling for his resignation. U.K. stocks, gilts and the currency all weakened, and the pound logged one of its steepest weekly declines in recent months. Across asset markets, the U.S. dollar index rose for a fifth straight week, posting its biggest weekly gain in two months. Gold and silver initially advanced on safe-haven demand before reversing sharply. U.S. equities pulled back on Friday after notching fresh record highs earlier in the period. Elsewhere, India raised its gold import tariff and introduced limits on import volumes to relieve foreign-exchange pressure. South Korea's Samsung Electronics faces the risk of a large-scale strike involving more than 50,000 workers, prompting government intervention to mediate.