Economics Report - May 5, 2026

Take Five: Sell in May? Let's find out

LONDON, May 1 (Reuters) - From high oil prices and the conflict in the Middle East to Japan's yen, the latest U.S. jobs data, an Australian rate decision, and a UK local election: there's plenty for traders to mull over in coming days.

Here's all you need to know about the week ahead in financial markets from Lewis Krauskopf in New York, Andy Bruce, Dhara Ranasinghe and Samuel Indyk in London and Rocky Swift in Tokyo.

1/ WORRIED YET?

Oil prices are rising again, briefly vaulting back above $120 a barrel last week to the highest since 2022 (remember that?), as the war with Iran enters a third month.

While the U.S. and Iran face pressure to end a conflict that has shut the Strait of Hormuz, the world watches anxiously as the biggest ever disruption to energy supplies unfolds.

For each week the Strait is closed, keeping oil elevated, the greater the economic risks via higher inflation or weak growth or, for some, both. Oil importer Japan just intervened to prop up a yen that has been weakened by the conflict. Global stocks are holding up, bolstered by strong earnings and AI, but surely that can't last as the war drags on?

A new month is now underway and some traders will be mindful of that old adage - "sell in May and go away".

2/ UP-AND-DOWN U.S. JOBS

As the U.S. economy grapples with fallout from the Middle East war, Wall Street's radar turns to Friday's April monthly payrolls report.

The U.S. economy likely created 73,000 new jobs, economists polled by Reuters forecast. In March, payrolls increased by 178,000, the most since December 2024, but that followed a sharp decline in February.

The U.S. employment data comes amid signs of hawkishness at the Federal Reserve, as Donald Trump pick Kevin Warsh prepares to take over as chair with the U.S. president keen on rate cuts.

The Fed held rates steady on Wednesday, as expected, but three policymakers dissented because they thought language in the policy statement pointing to an "easing bias" was no longer appropriate - indications that the Fed faces hurdles to cut rates this year.

3/ ELECTION TEST FOR STARMER

Thursday's municipal elections in Britain, usually a non-event for investors, could move markets in a big way, with opinion polls pointing to a heavy defeat for Prime Minister Keir Starmer's Labour Party.

Gilts have sold off this year at moments that threatened Starmer's political future.

He's struggling to justify his decision to appoint Peter Mandelson as Britain's ambassador to the United States, despite Mandelson's known ties to late U.S. sex offender Jeffrey Epstein.

A heavy defeat could spark more widespread demands for his dismissal among his own lawmakers and stoke expectations of a successor more willing to run looser budgets. That would bring more bad news for British bonds.

The 10-year gilt GB10YT=RR is already the worst performer among G7 peers since the Iran war started on February 28, by a wide margin.

4/ ENERGY FUELS EUROPE'S EARNINGS GROWTH

It's a big week for European earnings. Energy majors Shell SHEL.L and Equinor EQNR.OL, Commerzbank CBKG.DE and HSBC HSBA.L, and defence stocks Rheinmetall RHMG.DE, Leonardo LDOF.MI and Renk R3NK.DE all report.

On aggregate, European earnings are likely to show robust growth of 3.2% in Q1, according to LSEG I/B/E/S. Under the surface, it's a little bit more complicated. Growth is expected to be driven by just three sectors: financials, tech and energy. The latter is seen as the biggest beneficiary of the Iran war due to higher oil and gas prices. But if the war, and energy surge, persist, the overall outlook for Europe's earnings could turn.

For now, this reporting season might be too early for that to be reflected in company guidance, but it's one to watch in coming months. And it's perhaps a reason why investors have turned their attention back towards surging U.S. stocks.