Weekly market commentary

Global markets finished the past week on a good footing, with risk assets extending what has become one of the most powerful equity rallies of recent years. Quarter-end flows helped propel the S&P 500 to its best quarter in six years, with the Nasdaq up roughly 27% and semiconductor stocks delivering an extraordinary 87% quarterly gain, as investors continued to embrace the AI theme. European equities also participated, with the Euro Stoxx 50 posting double-digit gains for the quarter, while Asian markets remained more mixed but broadly constructive. 

The broader backdrop remains favourable for risk assets, as markets increasingly price a combination of resilient growth and strong corporate profits. This was underlined by Treasury Secretary Bessent this week, as he continued to argue that US growth is re-accelerating on a “non-inflationary” basis, reinforcing the market narrative of strong growth combined with moderating price pressures. At the same time, attention has centred on Fed Chair Kevin Warsh and his read on growth versus inflation dynamics at the Sintra central bank conference. In foreign exchange markets, the Japanese yen was once again a major talking point. USD/JPY traded close to 163, its weakest level since 1986, despite repeated verbal intervention from Japanese officials and direct engagement between Finance Minister Katayama and Bessent. Markets remain unconvinced that rhetoric alone can reverse sentiment and positioning, raising the prospect of another round of official intervention following large-scale operations earlier this year. Elsewhere, volatility in Asian technology shares was amplified by significant flows linked to leveraged SK Hynix-related ETFs, contributing to sharp sector rotations across the region. 

Geopolitically, tensions in the Middle East continued to ease. Reports indicated constructive discussions involving US envoy Steve Witkoff and regional intermediaries, while Washington introduced a 60-day waiver on Iranian oil sanctions as part of efforts to secure a longer-term peace arrangement and maintain open transit through the Strait of Hormuz. The resulting prospect of additional Iranian supply helped calm oil markets. In the technology sphere, another significant development emerged as OpenAI reportedly discussed granting a 5% equity stake to the US government through a public wealth fund structure, an unprecedented proposal that reflects growing efforts to address political concerns surrounding the concentration of AI-driven wealth and strategic technology leadership.