PRE-MARKET BRIEFING

Monday, May 11, 2026

Overnight Markets

Markets are showing a cautious start to the week, with mixed signals across regions as investors digest ongoing geopolitical tensions in the Middle East. Energy markets remain volatile with Brent crude surging over 3% to $104.35/barrel, while risk assets display uneven performance amid uncertainty over U.S.-Iran relations.

Asia Pacific

Asian markets delivered mixed results overnight, with China's Shanghai Composite leading gains at +1.08% to close at 4,225, suggesting some resilience in mainland equities despite broader regional headwinds. Japan's Nikkei 225 retreated 0.47% to 62,418, weighed down by technology sector weakness that mirrors global trends. Hong Kong's Hang Seng managed a marginal 0.05% gain to 26,407, showing relative stability in the face of geopolitical uncertainty.

The modest underperformance in Japan and sideways action in Hong Kong suggests investors remain cautious about risk exposure as Middle East tensions continue to influence energy markets and broader sentiment.

European Markets

European equities struggled to find direction in Monday trading, with most major indices closing lower. France's CAC 40 led declines, falling 0.88% to 8,041, while Germany's DAX slipped 0.39% to 24,244. The UK's FTSE 100 managed to hold relatively steady, down just 0.01% at 10,232, benefiting from energy sector strength as oil prices rallied.

The divergent performance reflects varying regional exposures to energy and geopolitical risks, with oil-sensitive markets showing more resilience than broader European equity benchmarks.

US Futures

U.S. futures are pointing to a mixed but generally positive open, building on Friday's strong technology-led rally. Based on Friday's close, the S&P 500 gained 0.84% to 7,398.93, trading within striking distance of its 52-week high of 7,402. The Nasdaq surged 1.71% to 26,247.08, virtually touching its 52-week peak of 26,249. The Dow Jones lagged significantly with just a 0.02% gain to 49,609.16, remaining 1.8% below its 52-week high of 50,513.

Technology shares led Friday's advance with the sector gaining 3.44%, while defensive sectors like utilities (-0.89%) and healthcare (-0.85%) underperformed. This rotation suggests investors are positioning for continued growth despite macro uncertainties.

Geopolitical Risks

Middle East tensions are creating significant volatility across commodity and risk markets. Reports of U.S. military action against Iranian oil infrastructure have sent crude prices sharply higher, with Brent crude rallying 3.02% to $104.35/barrel, though still 17.2% below its 52-week high of $126.

The situation appears fluid, with conflicting reports about potential diplomatic progress alongside continued military posturing. Energy markets remain highly sensitive to developments, and any escalation could pressure broader risk assets while supporting oil prices and energy equities.

The potential for disruption to Persian Gulf shipping lanes continues to underpin oil prices, despite being well below recent peaks, suggesting markets are pricing in ongoing but manageable geopolitical risk premiums.

What to Watch Today

Key Focus Areas:

• CPI Data Tomorrow: Tuesday's Consumer Price Index release will be critical for Fed policy expectations, with the 10-year Treasury yield rising to 4.39% as markets position ahead of the data
• Energy Sector Performance: Oil's 3% rally overnight should boost energy stocks, which could lead sector performance if geopolitical tensions persist
• Technology Momentum: Friday's 3.44% tech sector surge has both major indices near record highs - watch for continuation or profit-taking

Market Dynamics:

• VIX at 18.17 suggests normal volatility levels despite geopolitical tensions
• Bitcoin (-1.19% to $81,189) and Ethereum (-1.66% to $2,330) showing weakness, with Bitcoin now 36% below its October 2025 peak of $126,080
• Gold's retreat (-0.64% to $4,700.50) despite geopolitical risks suggests investors favor oil over precious metals as the preferred hedge

Economic Backdrop: With GDP growth accelerating to 2.0% annualized in Q1 2026 from 0.5% in Q4 2025, and unemployment stable at 4.3%, markets are balancing solid fundamentals against geopolitical uncertainties and tomorrow's inflation data.

The session setup suggests energy and technology could drive early action, while defensive sectors may continue to lag in the current environment.