Weekly market commentary

Global risk assets finished the week on a firm footing, supported by a renewed acceleration in the AI trade and resilient earnings from US mega‑caps. The S&P 500 moved decisively above 7,500, with strength in Nvidia, a positive read‑through from Cisco and strong demand for Cerebras’s IPO reinforcing confidence in AI‑linked growth. This was further underpinned by solid US macro data, with retail sales and core measures surprising to the upside and the Atlanta Fed’s GDPNow estimate for Q2 revised up to 4.0% annualised, pointing to continued near‑term resilience. Labour market data showed only marginal softening, with jobless claims edging higher but remaining consistent with a still‑tight backdrop. 

However, gains remained narrowly driven, with performance concentrated in US large caps while small caps lagged, highlighting continued fragility in broader market breadth. In FX, the US dollar strengthened alongside higher yields, while sterling weakened against both the dollar and the euro, reflecting domestic political uncertainty. Commodities were a key driver of cross‑asset moves, with oil and natural gas rallying sharply, reinforcing inflation concerns and adding upward pressure to yields. 

Recent inflation data has reinforced the view that the Iran conflict is evolving into a broader and more persistent supply driven shock. US CPI rose to 3.8% year on year in April — the highest since 2023 — with energy a key driver, while producer prices also surprised to the upside, signalling a widening passthrough into transport and services costs. In response, Treasury yields repriced higher, with the 10 year exceeding 4.5%, as expectations for Fed easing were pushed further out. Markets are increasingly questioning the timing and extent of US rate cuts in 2026, with the combination of elevated energy prices and emerging second round effects pointing to more persistent core inflation and continued rate volatility. 

Against this backdrop, the Trump–Xi summit provided some limited but constructive reassurance, with both sides signalling support for improved economic engagement. Chinese officials reiterated a commitment to further economic opening, while currency markets reflected the shift in sentiment, with the onshore yuan strengthening to a three‑year high.