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Tuesday, May 12, 2026
What’s happening: Japanese stocks gained this morning driven by strength in tech majors.
What happened: Investor sentiment was lifted by optimism about the economy and AI-driven demand.
Asian markets largely shrugged off concerns around the delicate US-Iran situation this morning.
Why it matters: US President Donald Trump rejected the latest peace proposal sent by Iran, calling the terms “totally unacceptable.” Trump said the ceasefire between the US and Iran was on “massive life support,” triggering concern around prolonged tensions.
The Strait of Hormuz remained almost closed, which has significantly impacted global shipments of crude oil and LNG, taking energy prices higher and raising inflation.
The latest summary of opinions from the Bank of Japan’s April meeting signalled that policymakers are considering further rate hikes by as early as their next meeting, due to rising crude prices and inflation.
Japan’s economic data supported market sentiment this morning. The country’s foreign reserves surged by $8.25 billion to $1.38 trillion in April versus a three-month low of $1.37 trillion in March.
Household spending fell 2.9% year-over-year in March following a 1.8% decline in the previous month and missed market expectations of a 1.3% contraction. The latest reading signalled the fourth consecutive decline in personal consumption, due to continuous inflationary pressure.
Japan’s shares rose amid a broader rally in AI and semiconductor stocks, which drove global stock indices higher. South Korea’s Kospi surged to a record high, while Hong Kong’s Hang Seng also climbed.
Japan’s tech and AI stocks recorded significant gains, with shares of Fujikura, SoftBank and Advantest rising sharply this morning.
Japan’s Nikkei 225 climbed 1.1% to breach the 63,000 resistance level this morning, while the yen continued to weaken, taking the USD/JPY forex pair higher by 0.2% to 157.53.
What to watch: Investors will continue monitoring the US-Iran situation, while the UK and France are set to host a multinational meeting of defence ministers to plan assisting ships through the Strait of Hormuz.
Data on Japan’s current account (0350 UAE Time), bank lending (0350 UAE Time) and Eco Watchers survey current (0900 UAE Time) will be released on Wednesday. Japan’s current account surplus, which fell slightly to ¥3,932.7 billion in February from ¥3,938.4 billion in the year-ago period, is expected to shrink further to ¥3,879 billion in March. Japan’s bank lending, which surged 4.8% year-over-year in March, up from 4.5% in the previous month, is expected to rise by 4.6% in April. Analysts expect Japan’s services sector index to decline to 41.6 in April from 42.2 in March.
Context: The Australian dollar fell versus the US dollar this morning as investors digested the latest data.
Details: Data released this morning showed that Australia’s NAB business confidence index climbed to a reading of -24 in April from -29 in the previous month. This was the second-largest monthly decline on record. The survey signalled concerns over higher energy prices due to the Middle East conflict weighing on margins and impacting investment.
Australia’s building permits declined 10.5% to 17,300 units in March, following a 31.0% surge in the previous month. This marked the steepest decline since late December 2025. Private house approvals in Australia gained by 0.9% to 10,194 units in March, following a 2% surge in the previous month.
Investors remained cautious due to rising concerns related to the US-Iran conflict, after Trump rejected Tehran’s latest peace proposal.
Strength in the US dollar weighed on the AUD/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose around 0.2% to 98.12 this morning.
The AUD/USD pair fell around 0.3% to 0.7231, while the S&P/ASX 200 declined about 0.4% to 8,668.10 this morning.
What to watch: Investors will continue monitoring talks between the US and Iran.
Markets will also focus on Australia’s 2026-27 federal budget (1330 UAE Time) due to be released today. Data on Westpac consumer confidence (0530 UAE Time), home loans (0530 UAE Time) and wage price index (0530 UAE Time) will be released on Wednesday. Australia’s Westpac–Melbourne Institute consumer sentiment index, which dipped 12.5% to 80.1 in April, is expected to rise to 81 in May.
The value of new owner-occupier loan commitments for dwellings, which surged 10.6% to a record high of A$65.3 billion in the fourth quarter, is expected to rise by 5.1% in the first quarter. Analysts expect Australia’s wage price index to rise by 3.3% year-over-year in the first quarter, following a 3.4% gain in the previous quarter
Other Markets: US trading indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.19%, 0.19% and 0.29%, respectively.
Ukraine’s President Volodymyr Zelenskyy said Russia has no intention of ending the war. The news sent the USD/RUB pair lower in forex trading this morning.
Sri Lanka’s number of foreign tourist arrivals contracted by 22.3% year-over-year to 135,643 in April, after a 19.7% decline in the previous month, which lent support to the USD/LKR forex pair.
Philippines’ net foreign direct investment fell by 31% year-over-year to $0.6 billion in February, which sent the USD/PHP pair higher in forex trading this morning.
Ireland’s AIB construction PMI fell to 47.1 in April from 53.2 in the previous month. The latest reading signalling the first contraction in three months exerted pressure on the EUR/USD forex pair.
UK’s retail sales contracted by 3.4% year-over-year in April, compared to a 3.1% gain in the previous month. The latest reading missing market expectations of 0.8% growth sent the GBP/USD pair lower in forex trading this morning.
Italy’s industrial production (1200 UAE Time), Eurozone’s ZEW economic sentiment index (1300 UAE Time), Germany’s ZEW economic sentiment index (1300 UAE Time) and ZEW current conditions (1300 UAE Time), South Africa’s unemployment rate (1330 UAE Time) and manufacturing production (1500 UAE Time), US NFIB business optimism index (1400 UAE Time), India’s inflation rate (1430 UAE Time), Brazil’s inflation rate (1600 UAE Time), Mexico’s industrial production (1600 UAE Time), as well as US ADP employment change (1615 UAE Time), inflation rate (1630 UAE Time), CPI (1630 UAE Time), Redbook index (1655 UAE Time), total household debt (1900 UAE Time) and monthly budget statement (2200 UAE Time).
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