Edward Meir's week in review and thoughts for the week of May 18, 2026

On Iran, President Trump said both sides agreed that the country should not have a nuclear weapon and that the Strait of Hormuz should be reopened with no tolls imposed. Trump also noted that China even offered its help to resolve the conflict. However, China’s Foreign Ministry was more circumspect. It called for a cease-fire and for the Strait to reopen. But it also noted the war “should have never happened [and] has no reason to continue”–not exactly an offer of help. Trump later said that the US does not expect aid from any country because it only invites requests for “favors” in return.

Over the weekend, China said that it would buy more agricultural products from the US over the next three years, along with additional Boeing planes. It was widely reported that China’s plane order would number 200, an amount less than expected. President Trump later said that Beijing might top up the order by an additional 500 planes. (That was still not enough to prevent a 10% decline in Boeing shares over the course of the Thursday and Friday sessions.) China also agreed to address US concerns about supply chain shortages for rare earths and critical minerals as well as to review import license programs for US beef and poultry imports.

The two sides said they would establish joint “boards of trade and investment” to better identify areas where business could be expanded. In addition, a general “tariff truce” would remain in effect until October and will presumably get renewed when President Xi visits Washington, DC, in September. Trump is also considering lifting sanctions on Chinese companies that buy Iranian oil.

Of course, Taiwan was front and center for President Xi and arguably more important to the Chinese leader than the Middle East is. Xi pushed for a shift in US official policy and a halt to further arms shipments to Taiwan. Trump held his ground, not promising anything other than to say he will decide on an arms package at some later date.

Energy

Energy markets were clearly disappointed by Beijing’s non-committal stance toward the Iran war, especially given China’s clout as a major buyer of Iranian crude. Brent added $8 per barrel (bbl) on the week to finish on Friday at $109.47/bbl. WTI finished up $10/bbl to settle at $105.66. There were roughly $0.10 per gallon and $0.15/gallon advances in both gasoline and distillates, respectively. Natural gas prices ended pretty much flat at $2.96. That complex has been fairly insulated from the goings on in the Middle East for some time now. As we kicked off the early Monday session in Asia, crude prices were up again, this time by about $2.50/bbl on both crude contracts.

Outside of energy, several other markets reacted negatively to the Trump/Xi summit. Interest rates moved sharply higher as investors now suspect that the Iran war is going to drag on, with worrying implications for both inflation and interest rates. In fact, markets assess the likelihood of a December rate increase at 55% compared with less than 20% a week ago. Talks of cuts have virtually disappeared.

Bonds and interest rates

In the US bond market, the US 30-year treasury last week soared above 5% for the first time since 2007. The 10-year and two-year yields each spiked by about 17 basis points and 19 basis points, respectively. Relatively high inflation readings on both CPI and PPI reported last week did not help matters either. (We discuss these later).

The rise in interest rates was not only unique to the US. In Britain, rates soared on continued uncertainty about the fate of Prime Minister Keir Starmer as more ministers resigned. A few are positioning themselves to run against him if a leadership contest is called. UK gilt markets are also concerned that whoever succeeds Starmer could turn out to be even more left of center. Japanese yields also spiked on interest rate uncertainties. What do all three bond markets share? A concern there seems to be no end to the standoff in the Strait of Hormuz, which suggests that inflation will remain elevated and that interest rates will follow suit.

Metals

In other markets, LME copper prices ended pretty much flat last week, but not before hitting a four-month high earlier. Aluminum gained 1.7%. Zinc and tin were each up by roughly 3% (and the strongest in the group). Lead finished just about flat.

As the dollar pushed higher on the back of rising US interest rates last week, both gold and silver came under severe pressure. They lost about 3% and 4%, respectively. Platinum and palladium lost 4% each on the week as well.

US equities

US equity markets finished lower last week after posting record highs earlier. The S&P 500 finished down 1.2%. NASDAQ lost 1.5%. And the Dow was off by -1.1% as the surge in oil and rising Treasury yields weighed on valuations. Home builders were particularly weak. iShares for the Home Construction ETF tumbled 7.0% on affordability concerns. The energy sector (up 6.8% on the week) was the clearest outperformer. Equity investors have repeatedly shown a willingness to buy pullbacks, especially in AI and technology names. But last week’s action suggests they are becoming less willing to do so.

Macro readings and other news from the past week

• The April CPI report showed another firm inflation reading. But it was not as big a shock as the next day’s producer price report. Overall CPI came in at +0.6% month over month (m/m), below the consensus of 0.9%. The core climbed by 0.4%, ahead of the 0.2% expected. Year-over-year (y/y), total CPI was up by 3.8% versus 3.3% in March. The core CPI was running at an annual rate of 2.8% versus 2.6% in March. The PPI report showed prices up 1.4% m/m and 6% y/y, the largest monthly increase since March 2022. Cost pressures are clearly moving through both goods and distribution channels.

• April retail sales rose 0.5% m/m, in line with expectations. Sales excluding gasoline and autos rose by 0.5%, a welcome increase given the squeeze consumers are feeling on account of rising gasoline prices

• The ISM manufacturing index rose to 84.6 in April from 78.3 in March, its highest reading since April 2022. The increase was driven by rising steel and aluminum prices along with higher energy costs. Those trends kept input-cost inflation elevated.

• Industrial production rose 0.7% in April. Manufacturing output increased 0.6%. Manufacturing output excluding motor vehicles and parts rose 0.3%. Capacity utilization moved up to 76.1%, up on the month, but still 3.3% below its long-run average.

• The Empire State manufacturing survey pointed out better activity but worsening supply conditions. The general business conditions index rose to 19.6, its highest reading in more than four years. But delivery times lengthened substantially. Both input and selling prices increased as well.

• April existing home sales edged up only 0.2% to a 4.02 million annual rate, which was below expectations. Affordability remains a major constraint, with high mortgage rates and inflation discouraging buyers. The median price for an existing home rose by 0.9% y/y to $418,000, marking the 34th consecutive monthly increase. The median time for existing homes to be on the market was 32 days versus 41 in March.

• The US Commerce Department assigned new duties in several South Korean steel cases. Hyundai Steel, POSCO, and POSCO International were assigned HRC dumping fees of 1.49% and 1.22%, respectively. South Korean export applications to the US for hot-rolled coil (HRC), hot-dipped galvanized (HDG), and cut-to-length (CTL) plate are down 22% from March levels and 16% lower from a year earlier.

• Alcoa announced a $65 million investment to expand and upgrade its Mosjoen smelter casthouse in Norway, adding up to 75,000 tons of foundry capacity through 2028. The project strengthens Alcoa’s low-carbon aluminum offering in Europe at a time when regional supply has been shaken by Middle East tensions.

• Century Aluminum said it is positioned to benefit from stronger US and European aluminum markets as it restarts capacity in South Carolina and Iceland. The company estimates the Iran war has disrupted about 2.5 million tons of Persian Gulf production and has also expanded the expected 2026 global deficit to 1.4 million tons. Century said its Mt. Holly restart should lift total US primary aluminum output by nearly 10%, while Grundartangi’s second line in Iceland remains on track to be restored by the end of July.

• In trade news, President Trump’s 10% across-the-board tariffs were deemed illegal by a court last week. In a 2-1 decision, the US Court of International Trade ruled the administration lacked the justification to enact tariffs under a 1974 trade law known as Section 122. The ruling came down in favor of the two parties that brought the suit and does not apply to all importers. But we suspect companies and individuals will file legal claims to try and claw back the duties they have paid.

• Eurozone industrial output rose in March by 0.2% on the month after a rise of 0.2% in February. We suspect much of this modest increase was attributable to frontloading of production in anticipation of higher costs and potential supply disruptions. Germany continues to struggle. Its industrial output fell by 1.2% in March.

• China’s producer prices hit a 45-month high in April. Consumer inflation also accelerated. The country’s PPI rose by 2.8% from a year earlier, exceeding the 1.6% Reuters forecast. (The PPI has been up in both March and April, breaking a 41-month declining streak.) CPI readings were up 1.2% y/y in April versus a 1% increase in March. Separately, Chinese new yuan loans shrank by 10 billion yuan ($1.47 billion) in April, far below expectations. It was the first monthly contraction since July 2025.

This week’s US macro readings

It should be a fairly light week on the numbers front. There are no releases scheduled for Monday.

On Tuesday, we get April pending home sales (expected at 1.5%, prior 1.5%). Wednesday brings us the Fed minutes from the prior meeting – former Federal Reserve Chair Jerome Powell’s last.

Thursday brings us weekly initial claims (expected at 210,000) as well as April housing starts and building permits (expected at 1.4 mln and 1.38 million, respectively, vs. the prior month’s reading of 1.5 million and 1.37 million). The May Philadelphia Fed manufacturing survey also comes out Thursday (expected at 18, last 27) as does the S&P flash PMI number for US services and manufacturing.

Friday brings us final consumer sentiment readings for May (expected at 48.2, unchanged from the month prior) and April US leading economic indicators (expected at -0.2%, last -0.6%).

 We wish all our readers all the best for the upcoming week.