Monday, May 4

Easing fears of a prolonged Middle East conflict drove a sharp rebound in global equities, with falling oil prices countering earlier supply shock worries that had pressured markets. The S&P 500 hit a historic high, recovering to pre-conflict levels alongside Japan's indices, while European stocks rallied but stayed below prior peaks; large-caps beat small-caps and value topped growth as energy retreated from oil-driven gains. Brent crude tumbled on ceasefire optimism and a U.S. blockade squeezing Iranian oil revenue, enabling 25% higher U.S. crude exports to fill global gaps.

Treasury yields climbed after the FOMC held rates steady but revealed the most dissents in Chair Powell's tenure—three against easing language—signaling hawkish internal divides against consensus for cuts. The 10-year JGB yield rose to 2.50% as the BoJ hiked its 2026 inflation forecast to 2.8% amid war-linked supply shocks, halving growth to 0.5% and raising rate hike odds. ECB futures now price one or two hikes by year-end on persistent inflation, diverging from steady U.S. policy expectations. The dollar weakened with oil's decline, hinting at revived Fed easing bets post-conflict.

China's Moody's outlook upgrade to stable underscored macro resilience despite debt risks, boosting policy-supported sectors like AI and manufacturing. Singapore's MAS tightened for the first time in four years, citing lagged energy supply recovery. Yet Qatar gas damage and fertilizer disruptions risk prolonged inflation in food and Europe.

Tuesday's ECB rate decision matters because markets price hikes on energy-stagflation wiping out wage gains; a hold would signal policy divergence cracking versus U.S. steadiness.