Weekly market commentary

Market review

Earnings season remained the primary focus for markets this week, temporarily shifting attention away from geopolitical developments and tariffs. Two of the so-called 'Magnificent Seven' reported this week with Google’s parent company, Alphabet, posting solid earnings growth and outlining plans to increase investment in cloud and AI technologies, whilst Tesla reported a material decline in revenues and signalled that challenging quarters may lie ahead. Numerous other global names also reported, including several international banks and technology firms. While these results were broadly supportive of equity markets, the real surprise came from a sudden trade agreement between the US and Japan, which saw the tariff on Japanese autos slashed as well as an agreement that Japan would increase their defence spending with US companies. In addition to this, the Trump administration also announced a 15% baseline tariff on the EU, potentially setting a template for any future trade deals with the bloc. These developments, which appeared to catch markets off guard, helped push equity markets higher with Japanese equities a key beneficiary, extending their gains for the week to over 5%.

On the macro front, it was a relatively quiet week for data. One notable release, however, was the UK public sector net borrowing figure (PSNB), which measures the difference between what the government spends and what it collects in taxes. This came in higher than expected, prompting fresh concerns over the feasibility of the current government’s spending plans. Some economists are now warning that the current trajectory could necessitate tax increases, especially if spending pledges and the “non-negotiable fiscal rules” remain unchanged.

The European Central Bank met on Thursday and as expected, held their deposit rate steady, at 2%. While the decision was widely anticipated, markets were watching closely for any shift in tone, particularly in light of the evolving global trade landscape, with hopes of an US & EU deal on the horizon. 

Outlook

With earnings season in full swing, investor attention is focused on corporate results and forward guidance. While trade tensions continue to simmer in the background, markets appear to be taking comfort in resilient earnings and signs that trade negotiation may be prevailing over escalation. The coming weeks will be key in assessing whether this optimism is justified.

Movers table