(The opinions expressed here are those of the author, a

columnist for Reuters.)

By Mike Dolan

LONDON, May 21 (Reuters) - What matters in U.S. and

global markets today

By Mike Dolan, Editor-At-Large, Financial Industry and Financial

Markets

In an already bad week for long bonds, an aggravated

inflation picture around the world has added another irritant. I

discuss this and all the market news below.

Be sure to check out my column today, where I explore why key

foreign creditors might be reassessing their holdings of U.S.

debt and what this could mean for funding America's rising

deficit.

Today's Market Minute

* President Donald Trump's tax cut and spending bill faces a

critical stress test on Wednesday as Republicans try to overcome

internal divisions about cuts to the Medicaid health program and

tax breaks in high-cost coastal states.

* Companies importing goods into the United States from China

are rushing to convert warehouses into facilities that are

exempt from President Donald Trump's tariffs until they are

ready to sell the merchandise.

* Oil prices gained more than 1% on Wednesday after reports of

Israel preparing a strike on Iranian nuclear facilities raised

fears that a conflict could upset supply availability in the key

Middle East producing region.

* Britain suffered a bigger-than-expected inflation surge in

April, including in areas watched closely by the Bank of England

which investors now believe will have to slow its already

gradual pace of interest rate cuts.

* Morgan Stanley upgraded its stance on U.S. equities to

"overweight", citing a slowing but still expanding global

economy despite policy uncertainty.

* Japanese exports rose 2% in April from a year earlier but

shipments to the U.S. fell 1.8%, data from the Ministry of

Finance showed on Wednesday.

* Global electricity generation from solar farms is set to

exceed output from nuclear reactors for the first time this

summer, marking an important milestone in the continuing growth

of solar power within global energy systems.

Bad week for bonds

Britain and Canada reported above-forecast core inflation

jumps for April over the past 24 hours - cutting across interest

rate easing expectations in both countries and sending long-term

government borrowing costs higher for

both.

On top of that, the crude oil prices jumped more than 1%

on Wednesday and briefly clocked their highest in a month after

CNN reported Israel was preparing to strike Iran's nuclear

facilities.

The darker global inflation picture comes as U.S. Federal

Reserve officials remain wary of tariff-related price hikes in

America.

Atlanta Fed chief Raphael Bostic said U.S. businesses may have

run out of strategies to delay changing prices or employment in

response to higher import taxes and the economy could soon face

a wave of price increases.

"If these pre-tariff strategies have run their course, we're

about to see some changes in prices, and then we're going to

learn how consumers are going to respond to that," said Bostic.

Another Fed interest rate cut is now not fully priced into

futures markets until October.

This latest bout of inflation anxiety comes at a nervy moment in

bond markets, with Japan's ultra-long government bond yields

spiking sharply this week after a poor debt auction there.

The U.S. Treasury is now due to sell some $16 billion of

20-year bonds later on Wednesday on the heels of Moody's

decision last Friday to remove the last U.S. AAA credit rating.

Both 20 and 30-year Treasury yields are

back above 5% and stalking their highest levels since 2023.

With long-term bond markets on edge, the bumpy passage of

President Donald Trump's fiscal plan doesn't help.

Trump's tax cut and spending bill faces a critical stress test

on Wednesday as Republicans in the House of Representatives try

to overcome internal divisions about cuts to the Medicaid health

program and tax breaks in high-cost coastal states. The

gate-keeping House Rules Committee scheduled an unusual

overnight hearing expected to run well into daylight hours.

The bill would extend the 2017 tax cuts that were Trump's

signature first-term legislative achievement, and also add tax

breaks on income from tips and overtime pay that were part of

his election campaign trail. Nonpartisan analysts say it could

add $3 trillion-$5 trillion to the federal government's $36.2

trillion debt pile.

If it clears the committee, House Speaker Mike Johnson could

push for a vote on the House floor as soon as Wednesday - with

Republicans holding a narrow 220-213 seat majority.

U.S. stock futures were down again ahead of today's

open, after the S&P 500 closed 0.4% in the red on Tuesday.

The dollar fell again too, with traders keeping one eye

on the G7 finance chiefs meeting in Canada this week for any

signs of U.S. pressure for a weaker dollar as part of its

bilateral trade negotiations.

Britain's pound was the big gainer - hitting its

highest since February 2022 against the dollar after the hot UK

inflation report.

In today's column, I discuss the recent turbulence in

Japan's bond market and how it signals a potential change in

appetite from Japanese investors that could have significant

implications for U.S. government debt.

Chart of the day

President Donald Trump's approval rating ticked lower this week

to just 42% - matching the lowest level of his new term as

Americans overall took a dim view of his handling of the

economy. While low by historical standards, Trump's popularity

remains higher than it was for much of his first term as

president and also higher than his Democrat predecessor Joe

Biden enjoyed in the second half of his 2021-2025 presidency.

The partisan split among those polled also remains extreme. But

on his economic policy performance overall, the Reuters/IPSOS

poll shows more than 50% disapprove - 12% of those identifying

as Republican voters and 94% those voting Democrat gave the

thumbs down. Of those with no voting preference, almost 60%

disapproved of the economic record so far. One-in-five

Republicans disapproved on the cost of living record.

Today's events to watch

* Canada April house prices (0830EDT)

* U.S. Treasury sells $16 billion of 20-year bonds

* G7 finance ministers and central bankers meet in Banff in

Alberta, Canada

* Richmond Federal Reserve President Thomas Barkin speaks;

European Central Bank Vice President Luis de Guindos and ECB

chief economist Philip Lane speak

* U.S. corporate earnings: Target, Lowe's, TJX, Medtronic,

Progressive

Opinions expressed are those of the author. They do not reflect

the views of Reuters News, which, under the Trust Principles, is

committed to integrity, independence, and freedom from bias.