Weekly market commentary

Markets navigated a busy week as investors balanced encouraging inflation news against ongoing geopolitical tensions and a growing debate around the sustainability of the AI investment boom. Despite bouts of volatility, equity markets remained broadly resilient, supported by strong corporate earnings and signs that inflation pressures may be easing.

In the US, inflation data surprised on the downside. Both consumer and producer price data were weaker than expected, helping to reduce concerns that the US Federal Reserve may need to raise interest rates again in the near term. While policymakers continue to stress that inflation remains above target, softer inflation readings provided reassurance that price pressures are moving in the right direction.

In the UK, investors also digested the appointment of Andy Burnham as Prime Minister following Labour's leadership contest. Markets reacted calmly, with some investors encouraged by Mahmood potentially becoming Chancellor and steering economic policy towards the political centre, helping to reassure markets on fiscal discipline while maintaining support for growth and investment.

Company earnings also took centre stage, with several major US banks reporting strong results. Robust trading revenues, investment banking activity and dealmaking helped support profits, reinforcing the view that both corporate activity and the broader economy remain relatively healthy. Financial stocks were among the stronger-performing areas of the market during the week. 

Within technology, investors continued to assess whether substantial spending on artificial intelligence will ultimately generate sufficient returns. While demand for AI-related investment remains strong, some technology and semiconductor shares experienced periods of weakness as investors became more selective. SpaceX attracted attention after its shares fell below their recent IPO price for the first time, highlighting that enthusiasm for high-profile growth companies may be becoming more measured.

Meanwhile, developments in the Middle East remained an important backdrop for markets. Renewed tensions between the US and Iran contributed to fluctuations in energy prices and served as a reminder that geopolitical risks remain an important influence on the economic outlook.