Daily Market Outlook, May 11, 2026 

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Minute — AI Euphoria, Oil Anxiety

Risk appetite starts the week with a split personality. Asian equities are still leaning into the AI trade, with the MSCI Asia Pacific index up 0.6% and tech driving the gains. South Korea surged 5% to a fresh record, reinforcing its position as one of the cleanest regional expressions of AI infrastructure demand, while the regional semiconductor index also hit new highs after Friday’s record close in the Philadelphia Semiconductor Index. US equity futures are steady after another record finish on Wall Street, and Europe looks set for a muted open. But the breadth is telling: outside tech, price action is far less convincing. Nintendo’s near-10% fall in Tokyo after warning on chip costs is a reminder that AI enthusiasm is not the same as margin immunity.

The macro problem is that the Middle East risk premium is back. Trump’s dismissal of Iran’s latest nuclear proposal as “totally unacceptable” has effectively reversed last week’s peace-deal optimism, sending Brent up 4.4% to above $105/bbl — close to where it traded before last Wednesday’s relief rally, after touching lows near $96/bbl on Thursday. With the Strait of Hormuz still constrained, the market is no longer pricing a clean de-escalation. Higher oil is feeding directly into bond markets, with the 10-year Treasury yield up 4bp to 4.39%, while the Dollar is firmer across majors as geopolitical risk and higher-for-longer rate expectations combine. Gold slipping toward $4,700/oz despite the risk backdrop speaks to that rates channel: safe-haven demand is being offset by rising real-yield pressure.

China’s inflation data add another complication, though not the one reflation bulls would want. April CPI beat at 1.2% y/y, 0.3ppts above expectations, but the bigger surprise was PPI at 2.8% y/y, a full percentage point above consensus. The detail points more to cost-push inflation from energy than a demand-led revival, which is less helpful for risk assets: it squeezes margins and real incomes without necessarily improving volumes. In Europe, ECB communication remains cautious but not dovish. Lagarde stressed uncertainty and the need for “a lot more data”, Guindos emphasised prudence and the hit to activity from the energy shock, while Kocher warned a near-term rate move may be unavoidable unless the inflation outlook improves materially. In short, higher energy prices are making central banks less comfortable, not more flexible.

The labour-market picture also argues against overconfidence. US payrolls beat consensus, rising 115k versus 65k expected, but revisions matter: March was revised to 185k from 178k, while February was cut further to -156k from -92k, meaning the recent profile is more volatile than previously thought. The three-month average is just 48k, and while that should mechanically improve when February drops out, the underlying signal remains patchy. Healthcare added 53.9k, retail 21.8k, and transportation and warehousing 30.3k, but beyond those pockets hiring remains glacial. Education and healthcare account for 60% of private-sector job creation year-to-date, and 70% including the public sector. Unemployment held at 4.3%, but participation fell again to 61.8%, with older men leaving the labour force and prime-age participation no longer rising; underemployment rose to 8.2%. 

Domestically in the UK, the KPMG/REC jobs report showed permanent placements slipping to 47.5 from 49.2, while temp hiring rose to 50.4, consistent with employers rotating toward flexibility amid uncertainty. Starmer’s mid-morning speech after heavy local-election losses will be watched through the fiscal and gilt lens, especially if EU-reset language is framed as a political stabilisation strategy. Equities continue to buy AI earnings optionality, but oil, rates, labour fragility, and UK political risk all argue for a more selective risk-on stance.

Overnight Headlines

• Trump Says Iran Peace Proposal Response ‘Totally Unacceptable’

• Iran Responds To US For Talks, Sets Terms For Hormuz Reopening

• Oil Jumps After Trump Says Iran’s Peace Offer ‘Unacceptable’

• Bond Traders Brace For Inflation Data As Fed’s Powell Era Ends

• Pimco CIO Sees Risk Of Fed Hiking Rates Due To Iran War

• ECB’s De Guindos Urges Prudence On Rates As Growth Weakens

• UK Jobs Market Cools As Iran War Hits Outlook, REC Survey Shows

• China’s Factory Inflation Hits Post-Covid High After Cost Shock

• Correction | China Confirms Xi-Trump Summit That Was Delayed by Iran War

• Trump Aims To Press Xi Over China’s Approach To Iran War

• Goldman Says Yuan 20% Undervalued, Boosts Currency Forecasts

• Rayner Urges UK PM To Change Course After Election Losses

• Nintendo Shares Tumble After Weak Switch 2 Games Outlook

• SoftBank Plans Large-Scale Batteries For AI Data Centres

FX Options Expiries For 10am New York Cut 

(1BLN+ represents larger expiries and is more magnetic when trading within the daily ATR.)

• EUR/USD: 1.1600 (EU2.76b), 1.1750 (EU2.1b), 1.1725 (EU963.7m)

• USD/JPY: 156.00 ($1.72b), 160.00 ($1.12b), 155.00 ($691.6m)

• AUD/USD: 0.7500 (AUD970.7m), 0.7300 (AUD719.6m), 0.7200 (AUD659.7m)

• USD/BRL: 4.9500 ($1.93b), 4.9000 ($1.22b), 5.1000 ($552.9m)

• USD/CAD: 1.3650 ($3.92b), 1.3660 ($1.13b), 1.3500 ($680m)

• USD/CNY: 6.7450 ($900m), 6.8450 ($320.1m)

• GBP/USD: 1.3670 (GBP470.3m)

• EUR/GBP: 0.8675 (EU510.4m), 0.8700 (EU409.5m), 0.8855 (EU391.6m)

• NZD/USD: 0.5840 (NZD631.9m)

• USD/KRW: 1435.00 ($350m)

CFTC Positions as of May 8, 2026: 

• Equity fund speculators have made some notable adjustments recently, reducing their net short position in the S&P 500 CME by 6,871 contracts, bringing the total down to 389,571. Meanwhile, equity fund managers are feeling more optimistic, increasing their net long position in the S&P 500 CME by 14,772 contracts, now totaling 1,013,955.

• In the realm of Treasury futures, speculators have also been active. They've cut their net short positions in CBOT US 5-year Treasury futures by a significant 100,106 contracts, now standing at 1,421,299. The CBOT US 10-year Treasury futures saw a reduction of 23,868 contracts in net short positions, which now sits at 815,269. The CBOT US 2-year Treasury futures experienced a trim of 35,934 contracts, leaving a net short position of 1,673,329. Additionally, speculators reduced their net short position in CBOT US UltraBond Treasury futures by 34,850 contracts to a total of 259,435. However, there was an increase in the net short position for CBOT US Treasury bonds futures by 59,287 contracts, bringing it to 172,942.

• In the cryptocurrency market, Bitcoin's net long position has reached 1,441 contracts. 

• On the currency front, the Swiss franc has a net short position of -34,521 contracts, while the British pound's net short position is -63,908 contracts. The euro is showing strength with a net long position of 32,202 contracts, whereas the Japanese yen holds a net short position of -61,738 contracts.

Technical & Trade Views

SP500

• Daily VWAP Bullish

• Weekly VWAP Bullish

• Above 7300 Target 7430

• Below 7290 Target 7200

DXY

• Daily VWAP Bearish

• Weekly VWAP Bearish

• Above 98.85 Target 99.50

• Below 98.50 Target 96.12

EURUSD 

• Daily VWAP Bullish

• Weekly VWAP Bullish

• Above 1.1785 Target 1.18.50

• Below 1.1690 Target 1.16

GBPUSD 

• Daily VWAP Bullish

• Weekly VWAP Bullish

• Above 1.3445 Target 1.3885

• Below 1.34 Target 1.3320

USDJPY 

• Daily VWAP Bearish

• Weekly VWAP Bearish

• Above 160 Target 161

• Below 159 Target 152

XAUUSD

• Daily VWAP Bearish

• Weekly VWAP Bearish

• Above 4600 Target 5000

• Below 42700 Target 3600

BTCUSD 

• Daily VWAP Bullish

• Weekly VWAP Bullish

• Above 79k Target 86k

• Below 78k Target 76k