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Markets steady as BoJ flags higher inflation

Global equity markets were mixed at the start of the week as investors weighed a hawkish hold from the Bank of Japan (BoJ) and ongoing uncertainty around the Iran conflict. On Tuesday, the BoJ kept its policy rate unchanged but raised its inflation projections and trimmed growth forecasts, reinforcing concerns that higher energy prices could squeeze corporate profits and household incomes. US stock indices had already paused on Monday after recent record highs, while European equities slipped to start the week and Asia-Pacific markets traded mixed on Tuesday as traders assessed stalled progress on reopening the Strait of Hormuz and awaited a busy slate of major earnings, most notably from US tech giants due on Wednesday.

  • Data
  • Autore Shane Strowmatt, Senior Investment Writer
  • Tempo di lettura 5 minuto

Japan economy
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Japan’s central bank kept its policy rate unchanged at 0.75% on Tuesday in a split 6 – 3 decision, while policymakers raised the core inflation forecast for the fiscal year 2026 to 2.8% from 1.9% and cut the growth outlook to 0.5% from 1%. Dissenting board members argued for a rate increase to 1%, citing upside price risks from the Iran war and higher crude oil prices, which the BoJ warned could weigh on corporate profits and real household incomes. Recent data showed Japan narrowly avoided a technical recession late last year with quarterly growth of 0.3% and annual growth of 1.3%, while March core inflation accelerated to 1.8% year-on-year and headline inflation reached 1.5%, still below the bank’s 2% target, as "core-core" inflation eased to 2.4%. Government bond markets took the hawkish hold in stride with 10-year JGB yields little changed near recent multi-decade highs, while the Nikkei 225 fell 1.2% and the yen, which has weakened over 1.5% since the start of the year, traded around 159 against the US dollar.

Asia-Pacific stocks mixed on Iran uncertainty

Asia-Pacific equity markets showed a mixed performance on Tuesday as investors evaluated the latest signals from negotiations between the United States and Iran over a possible reopening of the Strait of Hormuz. US President Donald Trump met his national security team on Monday to discuss Iran’s reported proposal, which would tie reopening the key shipping lane to lifting the US blockade and ending the conflict, though it remains unclear whether he will accept this as a route to de-escalation. South Korea’s Kospi climbed around 0.5% to a fresh record and Australia’s S&P/ASX 200 lost 0.7% and Hong Kong’s Hang Seng Index declined 1%. Mainland China’s CSI 300 was 0.3% weaker, whereas India’s Nifty 50 was up 0.2%.

US indices pause after record gains

US stock indices moved little on Monday, with the Dow Jones Industrial slipping 0.1% to 49,167.79 points, while the technology-heavy Nasdaq 100 and the broad S&P 500 both notched fresh record highs, closing almost unchanged at 27,305.68 and 7173.91 points respectively. Investors remained cautious at the start of a week dominated by the Iran conflict, monetary policy signals and quarterly results, after a weekend without diplomatic progress on reopening the Strait of Hormuz despite a new Iranian proposal reported on Monday. Artificial-intelligence enthusiasm continued to drive chipmakers, with Nvidia shares gaining 4% to a record high and Qualcomm briefly jumping more than 8% after speculation about cooperation with AI platform provider OpenAI, before ending 1% higher.

German consumer climate falls sharply

Consumer sentiment in Germany deteriorated further on Monday, with the NIM Consumer Climate indicator for May projected at -33.3 points, a drop of 5.2 points from the revised -28.1 points in the previous month and the weakest reading since February 2023. Income expectations slumped by 18.1 points to -24.4 points as respondents anticipated higher inflation. The war in Iran and the associated rise in energy prices, which pushed German inflation up from 1.9% to 2.7% in March, are weighing on economic expectations, with the corresponding indicator dropping 6.8 points to -13.7 points as consumers fear a setback for the fragile recovery. European stock markets slipped on Monday. The Euro Stoxx 50 declined 0.3%, while Germany’s DAX and France’s CAC 40 both fell 0.2%. The Swiss Market Index was almost unchanged.

Corporate and economic calendar

Corporate news in focus: Quarterly figures from Coca-Cola, Novartis, S&P Global, Starbucks, T-Mobile US, United Parcel Service, Visa, and Welltower.

Economic data in focus: Conference Board Consumer Confidence Index (16:00) and European Central Bank President Christine Lagarde speaks (19:30).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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