Weekly market recap: Market rebound continues thanks to tariff truce
The post-April market recovery gained momentum last week as US-China trade tensions eased and inflation concerns moderated, but upcoming economic data will provide the true test.
Rally continues, for the time being
The past week has seen the post-April risk rebound continue for global markets. Last Monday’s tariff truce between the US and China delivered a major boost to risk appetite, and meant that investors remained content to put money to work again in stock markets around the world.
Also helping sentiment were inflation reports in the US that pointed towards limited price increases, allaying worries that a new inflationary period is ahead. All told, stock markets continue to recoup losses from March and April, and hopes are high that more progress can be made on trade deals.
Earnings season in the US has provided yet another reason to stay positive on US markets. 78% of companies reporting have been able to beat estimates, and only around 10% of the S&P 500 is left to report.
But all this still feels like a short-term recovery in risk until we get data that actually covers a period when tariffs have fully come into effect. Both corporate and economic data is still looking at the first quarter (Q1) or April data. Figures for May and beyond will only start to filter through next month.
That’s when this recovery in stock markets will face its acid test.
Commodity watch – oil stalls but gold finds a low
Oil’s rebound from its May low has run into some resistance. Reports of progress in a deal between the US and Iran raised the prospect of a return of Iranian supply to global markets, putting downward pressure on prices. While investors are not quite as pessimistic on the global economy as they were in early April, it is notable that oil’s rebound has been much weaker than that for global stock markets.
Meanwhile, spot gold has finally suffered a check in its huge rally. While it managed to cross $3500.00 briefly, the recovery in risk assets has proven to be hindrance to further gains in the short term. A total reversal of the rally so far this year is unlikely at present, and the price appears to have found some support around $3200.00.
Busy week for UK companies
US earnings season is winding down, though Nvidia’s crucial figures will only come through at the very end of May. But there are plenty of UK companies reporting this week that will provide a useful insight into how the British economy is faring.
Key names this week include Marks & Spencer, Vodafone, JD Sports and Greggs. While none of these are particularly big weights in the UK’s main indices, they will still give us some steer on how the UK is navigating the world of tariffs.
While UK and Japanese inflation is released this week, the data covers April and so its relevance is limited. Global purchasing manager indices will perhaps be of more use, since the data is for the first half of May, and will be watched for signs of renewed inflation but also weakness in new orders and other signs of activity.
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