Newsletter Mercados

The market experienced a risk-off session on Monday, May 18, 2026, driven by escalating geopolitical tensions surrounding Iran and the resurgence of inflationary concerns. President Trump's decision to pause a planned attack on Iran and his optimism about a potential nuclear deal temporarily eased tensions, leading to a drop in oil prices and allowing for a partial recovery in Asian bonds and equities. However, persistent disruptions in the Strait of Hormuz and doubts about negotiations maintained uncertainty. Macroeconomically, China's activity data in April was weaker than expected, while in the U.S., the final demand PPI rose 6% year-on-year, reinforcing expectations of a Fed rate hike by the end of 2026. The ECB maintained its stance of consolidating rate expectations, with markets pricing in around three hikes for this year.

European sovereign bond yields showed diverse movements. The 10-year German Bund rose 1 bp to 3.16%, while the 10-year French OAT experienced a significant increase of 14 bps to 3.94%, reflecting fiscal and geopolitical pressures. In contrast, the 10-year Italian BTP and Spanish Bono each fell 1 bp, settling at 3.93% and 3.58% respectively. The 10-year UK Gilt retreated 6.9 bps to 5.103%, although the long end of the Gilt curve approached 5.85%, a level not seen since 1998. In the US, the 10-year Treasury rose 2 bps to 4.61%, while the 30-year Treasury surpassed 5.00%, reaching 5.14%. Curve dynamics reflected a steepening at the long end, particularly in the US, with the 2s10s spread widening, suggesting the market is pricing in more persistent inflation. European sovereign spreads remained relatively contained: the BTP-Bund stood at +77 bps, the OAT-Bund at +78 bps, and the Bonos-Bund at +42 bps.

The European sovereign debt market showed mixed performance. The 10-year German Bund rose 1 bp to 3.16%, while the 10-year French OAT saw a sharp increase of 14 bps to 3.94%, possibly due to fiscal concerns. The 10-year Italian BTP fell 1 bp to 3.93%, and the 10-year Spanish Bono also declined 1 bp to 3.58%. The 10-year UK Gilt retreated 6.9 bps to 5.103%, although the long end of the Gilt curve approached 5.85%. In the U.S., the 10-year Treasury rose 2 bps to 4.61%, and the 30-year Treasury reached 5.14%. European sovereign spreads remained relatively stable: the BTP-Bund stood at +77 bps, the OAT-Bund at +78 bps, and the Bonos-Bund at +42 bps. No significant sovereign debt auctions were reported during the session.

The corporate credit market showed a slightly negative sentiment, with major credit ETFs registering moderate declines. HYG (high yield) fell by 0.10% to $79.54, while LQD (investment grade) dropped by 0.20% to $107.66. JNK (high yield) also declined by 0.08% to $95.77, and VCIT (intermediate-term corporate bond) lost 0.16% to $81.90. These declines reflect a risk-averse environment, although the movements appear driven by beta rather than significant active flows. The macro context, with geopolitical tensions and persistent inflation expectations, continues to weigh on corporate credit, especially in the high-yield segment. No specific data was available for the iTraxx Europe Main or iTraxx Crossover indices.

The US dollar strengthened in the session, with the DXY index stabilizing around 99. The EUR/USD pair fell 0.06% to 1.16401, pressured by the strengthening dollar and expectations of a more hawkish Fed stance. The British pound showed strength against the dollar, with GBP/USD rising 0.74% to 1.34070, possibly supported by local economic data or specific flows. USD/JPY rose 0.09% to 158.985, reflecting dollar strength. EUR/GBP fell 0.15% to 0.86790, indicating relatively better performance by the pound. USD/CHF remained virtually flat (-0.01% at 0.78580). AUD/USD fell 0.42% to 0.71322, affected by weak Chinese data. USD/MXN rose 0.03% to 17.30000.

Commodity prices showed mixed movements. Brent crude rose 0.66% to 109.98 USD/barrel, supported by geopolitical tensions in the Middle East, although the pause in the planned attack against Iran limited gains. WTI fell 2.38% to 102.91 USD/barrel. Natural gas rose 2.20% to 3.03 USD/MMBtu. Gold remained practically flat (-0.06% to 4,543.90 USD/oz), acting as a safe haven. Silver fell 0.53% to 76.46 USD/oz. Copper dropped 0.15% to 6.24 USD/lb, affected by weak Chinese data. Aluminum rose 1.54% to 3,850.00 USD/lb. Agricultural products recorded strong gains: corn advanced 4.94% to 478.25 USc/bushel and wheat 5.39% to 670.00 USc/bushel.

European equity markets closed with mixed performance. The Euro Stoxx 50 fell by 0.05% to 5,849 points, while the German DAX rose by 1.49% to 24,307.92 points, supported by easing geopolitical tensions. The British FTSE 100 advanced by 1.26% to 10,323.80 points, showing resilience. In contrast, the French CAC 40 remained virtually flat (-0.01% to 7,987.49 points), and the IBEX 35 rose by 0.75% to 17,755.10 points. In the U.S., the S&P 500 closed virtually flat (+0.01% to 7,403.05 points), while the Nasdaq Composite fell by 0.11% to 26,090.73 points. The general trend in Europe was a partial rebound, influenced by reports of possible temporary exemptions to Iranian oil sanctions. However, conviction remains limited, and the movements lack strong follow-through to confirm structural changes.

The cryptocurrency market experienced a mixed session. Bitcoin fell by 0.72% to 76,873.33 USD, while Ethereum rose by 0.25% to 2,132.88 USD. The total cryptocurrency market capitalization decreased by approximately 3.8%, settling at 2.56 trillion dollars, according to web search data. Significant capital outflows were observed in cryptocurrency ETFs, especially in Bitcoin, suggesting investor caution. Ethereum's slightly positive movement could reflect sector rotation, although conviction remains limited.

The trading day of May 18, 2026, was marked by risk aversion driven primarily by geopolitical factors and persistent inflationary pressures. The resilience observed in some European equity indices, despite declines in others, suggests selectivity in investor positioning. Bond market dynamics, with curve steepening and yields at elevated levels, indicate that the market is internalizing a more restrictive monetary policy environment. Commodity price levels, especially oil, will remain a key catalyst for inflation expectations. Geopolitical tensions in the Middle East require continuous monitoring, as any escalation could exacerbate volatility. Attention will remain focused on upcoming economic data, especially inflation indicators and central bank statements. Market conviction remains limited, and price movements lack strong follow-through to confirm structural shifts.