Asia open: US PPI surges as Inflation heat derails rate cut hopes ahead of Trump-Xi summit

• US inflation pressures intensified after April PPI surged 6.0% y/y, reinforcing the “higher for longer” Federal Reserve narrative and fuelling expectations that any future Fed move could shift toward rate hikes rather than cuts.
• Donald Trump and Xi Jinping began high-stakes talks in Beijing, with AI competition, semiconductor restrictions, and Middle East geopolitical tensions dominating market focus.
• Despite rising bond yields and inflation shocks, AI-driven equity momentum remained resilient as the Nasdaq 100 and S&P 500 climbed to fresh record highs, while energy markets stayed elevated above $100/bbl due to worsening Strait of Hormuz supply concerns.
• Chart of the day: AUD/USD bullish breakout from minor range configuration, 0.7210 key short-term support with next intermediate resistances at 0.7265, 0.7300, and 0.7340.

• US producer prices surge: April PPI jumped 1.4% month-over-month and 6.0% year-over-year, marking the biggest gain in four years. The hotter-than-expected print confirms inflation is accelerating amid the ongoing conflict with Iran.
• Trump arrives in Beijing for high-stakes summit: President Donald Trump arrived in Beijing for meetings with Chinese President Xi Jinping. Nvidia CEO Jensen Huang joined the US delegation, highlighting the focus on the global AI race and the proposed US “MATCH Act” targeting Chinese chipmakers.
• EIA drastically revises Oil supply hit: The US Energy Information Administration revised its forecasts, projecting a much longer and more severe disruption to global oil supplies as Iran moves to formalize control over the Strait of Hormuz.
• Kevin Warsh confirmed as Fed official: The US Senate confirmed Kevin Warsh to a 14-year term as a Federal Reserve governor, setting him up as the likely successor to Fed Chair Jerome Powell.
• Alibaba posted an operating loss on AI Spend: Alibaba Group ADRs slipped 3% after posting its first operating loss since the pandemic, underscoring the massive capital expenditures required to compete in the AI space. Interestingly, its ADR recovered as the US session progressed and ended with a gain of 8% to close at a near 5-month high.

• Inflation resurgence cements “Higher for Longer”: Following the 3.8% CPI print, the massive 6.0% y/y headline PPI surge has completely wiped out remaining hopes for Fed rate cuts in 2026, and reflected an increase in rate hike bets coming in the first half of 2027, according to data from the CME FedWatch tool.
• The cost of the AI arms race: Alibaba’s earnings reflect a growing reality: the AI supercycle requires staggering, profitability-draining capital expenditures. Markets will increasingly scrutinize tech giants to balance AI spending with near-term margins.
• Structural geopolitical premiums: The oil market is shifting from pricing a “temporary disruption” to a “persistent geopolitical premium” as the Middle East conflict restricts global supply chain norms.

Equities: US stock markets remained buoyant despite a red-hot PPI print. Supported by tech stocks, the S&P 500 (+0.6%) and the Nasdaq 100 (+1%) rallied to another record high.

Fixed Income: The US 10-year Treasury yield climbed to an intraday high of 4.5% on Wednesday, 13 May, hitting a 10-month high as bond markets fully absorb the dual CPI and PPI inflation shocks.

FX: The US Dollar Index (DXY) extended gains to 98.45, marking a third consecutive session of strength as investors increased bets on a prolonged restrictive Fed policy.

Commodities: WTI and Brent crude remain elevated over $100/bbl following the EIA’s grim supply revisions. Spot Gold is holding near $4,645/oz, supported by haven demand ahead of the Beijing summit.

• Stock markets: Chinese and Hong Kong equities will be in focus, following Alibaba’s earnings miss, China’s vocal opposition to the US MATCH Act, and the Trump-Xi summit gets underway. Tech heavyweights like Tencent, Alibaba, Baidu, and Xiaomi will be closely watched. In today’s early Asia season, the China and Hong Kong stock markets opened with an upbeat tone; CSI 300 (+0.1%), China A50 (+0.1%), and Hang Seng Index (+1.1%) at this time of writing.
• Currencies: The yuan traded almost unchanged against the USD at 6.7855 per US dollar in today’s Asia opening hours as the Trump-Xi summit gets underway. The offshore yuan (CNH) has rallied for six consecutive sessions against the USD. It is now eyeing a near 3-year high of 6.7740 per US dollar as the market seems to be pricing a status quo in terms of US-China trade relations after the summit.
• Economic outlook: All regional eyes are on the Beijing summit. Any signs of diplomatic progress regarding Iran or AI trade regulations could trigger massive, rapid reversals in regional risk sentiment.

1. Trump-Xi Summit Developments Impact: USD/CNH, global equities, WTI, Brent crude
2. UK Q1 GDP Prelim – 2:00 pm SGT (consensus: 0.8% y/y, Q4 2025: 1% y/y) Impact: GBP/USD, GBP crosses, FTSE 100
3. US Retail Sales (Apr) – 8.30 pm SGT (consensus: 0.5% m/m, Mar: 1.7% m/m) Impact: USD, US Treasuries, US stock indices
4. US Initial Jobless Claims (week ending 9 May) – (consensus: 205K, prior: 200K) Impact: USD, short-term US Treasuries, US stock indices
5. Applied Materials Earnings – after US session close Impact: Semiconductor stocks, Nasdaq 100

The price actions of the AUD/USD have staged a bullish breakout from a minor “Symmetrical Triangle” range configuration on Wednesday, 13 May 2026.

Currently, it is retesting the former “Symmetrical Triangle” range resistance, which has now become a near-term pull-back support at 0.7244, as indicated by the hourly RSI momentum indicator, which is holding at the 50 level (see Fig. 1).

Watch the 0.7210 key short-term pivotal support on the AUD/USD. A clearance above 0.7265 triggers the next intermediate resistances at 0.7300 and 0.7340.

However, a break and an hourly close below 0.7210 negates the bullish tone for another round of potential minor corrective decline to expose the next intermediate support at 0.7180 (also the 20-day moving average), below it may see further weakness towards 0.7145/7130 next.

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