Yesterday markets ignored two bad headlines at once. US producer prices jumped +6% year on year, the biggest leap since December 2022, and Boston Fed President Collins openly mentioned that rate hikes might be needed. The S&P, Nasdaq and Dow set fresh records anyway. Trump landed in Beijing, Putin is talking about ending the war, and in Lithuania the former prime minister arrived at the Special Investigation Service today, lawyer in tow. Here is what is actually on the table.
Markets Snapshot
– S&P 500 closed at 7,501.24 (+0.77%), first time above 7,500. Third record in a row. – Nasdaq Composite at 26,635.22 (+0.88%), a new all-time high. Cisco added rocket fuel after a strong earnings report. – Dow Jones at 50,063.46 (+370 points, +0.75%), reclaiming the psychological 50,000 line. Cisco earnings plus Beijing headlines did the work. – WTI crude near 101.5 USD per barrel, consolidating after a seven-percent jump across three sessions. Brent above 110 USD. The Strait of Hormuz remains closed, the US blockade holds. – Gold at 4,696.53 USD per ounce (-0.39%), second straight down session. Hotter inflation data means the Fed can keep rates higher for longer, bad for the yellow metal in the short run. – DXY above 98, third straight session higher. The hotter CPI killed off several rate-cut hopes, dollar recovers. – Bitcoin near 80,300 USD, fighting the 82,000 USD resistance level. The CPI shock prevented a breakout higher.
Lithuania and the Baltics
– Paluckas at the STT today. The Prosecutor General formally charged the former prime minister with unlawful enrichment. He arrived with his lawyer and refused to give testimony. The investigation claims that he and his wife Ilma may have unlawfully acquired property worth roughly 345,000 euros from December 2010 through the end of 2024 via cash bank deposits and cash purchases of vehicles, real estate and securities. – Searches at Žemaitaitis. The Financial Crimes Investigation Service the same day searched the offices and residences of “Nemuno Aušra” leader Remigijus Žemaitaitis and his deputy Daiva Petkevičienė. The case concerns the rental of MPs’ cars to the party. Two coalition partners hit on the same day. – Electoral Commission opens probe on Paluckas. The Central Electoral Commission will investigate whether the former PM grossly violated the Electoral Code by providing false information in his candidate questionnaire about completed court-imposed sentences. – Baltic Defense Conference. A two-day event closed in Vilnius yesterday, opened by President Nausėda. Lithuanian defense spending sits at 4% of GDP, Latvia at 3.73%, Estonia at 3.38%. That is the second, third and fourth largest share in NATO after Poland. Latvia secured 3.5 billion euros in SAFE loans for drones, counter-drone systems and missiles. – “Trojan Footprint 2026” NATO Special Operations exercises run until May 22 across all three Baltic states, alongside Poland, Germany, Bulgaria, Hungary, Georgia and others.
Europe
– Lagarde in Aachen speaks tonight at 21:50 local time at the formal dinner ahead of the Charlemagne Prize ceremony. The prize this year goes to Draghi, the ECB President will speak on European statesmanship. The text will be parsed separately for any signal that the ECB is preparing a narrative around rate hikes given 10.9% energy inflation. – Charlemagne Prize to Draghi. Lagarde will introduce him as “the exemplar of true European statesmanship, who answered the call when it mattered most.” Politically loaded, because Draghi, post “Whatever it takes” in 2012, is returning to the ECB orbit as a symbol.
Ukraine
– Russia launched over 800 drones in a mass daylight attack. At least 14 dead, over 80 injured, including children. Among the targets, importantly, was Zakarpattia, home to the Hungarian minority. A message to Orbán, not just to Zelenskyy. – The three-day ceasefire collapsed. The US brokered a pause around the Victory Day parade (May 7-9), but both sides are again hitting each other. Prisoner exchange talks nevertheless continue. – Putin says the war is “coming to an end.” After the Victory Day parade he declared himself ready to meet Zelenskyy in Moscow or a neutral country, but only after peace terms have been agreed. “That should be the endpoint, not the negotiations themselves.” Trump pressures him via Xi from Beijing.
Geopolitics
– Trump and Xi in Beijing. First US presidential visit to China since 2017. Today the two leaders visited the Temple of Heaven; the two-day summit began yesterday. Xi flagged Taiwan as “the most important issue in US-China relations” and warned that mishandling Taiwan would put the relationship in “great jeopardy.” – A 30 billion USD trade deal. Reports say both sides are weighing tariff cuts on 30 billion USD of non-sensitive goods. The so-called “Board of Trade” would be the main concrete outcome. The US business delegation includes Cook (Apple), Musk (Tesla) and Huang (Nvidia). – Iran and Hormuz still closed. Pakistan-mediated talks focus on reopening the strait. Iran threatens military action if the US blockade does not end. Commercial vessel traffic in the strait runs at just 5% of pre-conflict levels. The IEA calls it “the largest supply disruption in the history of the global oil market.” – OPEC+ in May is still adding 188,000 barrels per day, seven member countries executing the extra commitments. Russia’s exports: 48% of crude is moved by “shadow” tankers. – Xi and Trump on Iran. Beijing-aligned reporting says Xi will press Washington to lift the Hormuz blockade in exchange for higher Chinese purchases of US agricultural products. Iran is not the main target in the talks, it is leverage.
Central Banks
– PPI shock. Producer prices jumped +1.4% month over month, +6.0% year on year in April. Largest annual leap since December 2022. Core (ex food and energy) PPI rose +1% on the month versus a 0.4% consensus. Gasoline spiked +15.6% on the Iran war. – CPI shock. From the April data released Tuesday, prices climbed 3.8% year on year, the hottest reading since May 2023. Core inflation 2.8%, energy +17.9% YoY. Real average hourly earnings turned negative on the year (-0.3%). – Collins (Boston Fed) openly on hikes. “I could envision a scenario in which some policy tightening is needed to ensure that inflation returns durably to 2% in a timely manner.” First official to openly name a hike since Powell’s April decision to hold the pause.
IPO Watch
– Anthropic confirmed by Bloomberg to be in talks for a 30 billion USD round at a 900 billion USD valuation. The round could close by the end of this month. Annualized revenue rose from 9 to 44 billion USD year to date. Per Ramp’s data, 34.4% of enterprise customers pay for Anthropic versus 32.3% for OpenAI. IPO targeted for October. – OpenAI’s March round set the valuation at 854 billion USD. Anthropic, for the first time, could overtake.
What to Watch Tomorrow
– Lagarde in Aachen at 21:50 CET. If the text contains a formulation about “policy adjustment” or aligning rates with the new inflation reality, that is the signal that the ECB is preparing rate hike rhetoric. Eurozone energy inflation has been double-digit since April. – Trump-Xi joint statement. Day two of the summit ends with a final press release. The questions: is there a concrete number on tariff cuts, or just rhetoric, and does China make a concrete commitment on Iran. – Paluckas inside the LSDP faction. Post-charges, the Social Democrats must decide whether to keep the former PM in the parliamentary faction. Nausėda has already demanded a resignation. LSDP council meeting is set for late this week. – Anthropic round closing. End-of-month deadline. Any concrete number is a signal to the whole AI sector for valuation resets. – US Treasury auction. A 20-year supply auction after two inflation shocks. A bid-to-cover ratio below 2.3 means there are no buyers at this price.
Meška’s Comment
Yesterday a double-digit PPI print and Collins talking openly about hikes should have painted markets red. Instead the S&P, Nasdaq and Dow still printed records. The question is simple, does the market actually believe the CPI and PPI jumps are a one-off effect of the Iran war, or does no one care about inflation anymore as long as Trump in Beijing manufactures an illusion of a 30 billion USD trade deal. The cycle answers more reliably than I do. Liquidity, not fundamentals. As long as the Fed holds rates in pause and Powell tolerates a 4% CPI, capital flows into risk assets. And it will keep flowing, until it is too late.
Watch Lithuania. One former prime minister becomes a suspect, another coalition partner is raided the same day. Not over ideology, over 345,000 euros in cash and party-rental cars. This is not political theater, this is institutional cleansing. The system either cleans itself or gets cleaned from the outside. The first option is cheaper. The second is more common.
What actually deserves attention? Not Trump’s press conference in Beijing, not Putin’s diplomatic talk. Watch Lagarde tonight in Aachen. If she formally names that the ECB is considering rate hikes with double-digit energy inflation, the eurozone yield curve will shift overnight. That shift says more about the structural cycle than three summits combined.
May nothing blow up in Hormuz today. Tomorrow we continue.
— Meška