Major global equity markets were mostly stronger over the week, supported by renewed momentum in artificial intelligence-related shares and hopes that tensions in the Middle East could ease. In the U.S., the Dow Jones gained 2.13%, while the S&P 500 rose 0.88% to record its eighth consecutive weekly gain. The Nasdaq advanced 0.45%, while small-cap shares outperformed, with the Russell 2000 rising 2.72%.

There was also a clear shift in market leadership. Investors continued to favour Japan, Korea and AI/semiconductor-linked areas, while China and Hong Kong technology shares lagged. Sector preference also leaned toward areas better positioned for higher oil and inflation, including coal, oil, food retailers and drug retailers, while discretionary retail, travel and leisure, and real estate remained more vulnerable.

U.S. economic data was more mixed. The S&P Global flash composite PMI held steady at 51.7 in May, with stronger manufacturing activity offset by slower growth in the services sector. The manufacturing PMI rose to 55.3, its strongest level in four years, while the services index declined to 50.9.

However, price pressures remained a key concern, with input costs rising to their highest level since late 2022 and selling price inflation reaching its highest level since August 2022. Consumer sentiment was weaker. The University of Michigan consumer sentiment index fell to a record low of 44.8, while year-ahead inflation expectations increased to 4.8%.

U.S. monetary policy also remained in focus after Kevin Warsh was sworn in as the new Federal Reserve Chair. Since his nomination, higher oil prices and inflation concerns have pushed markets to price a higher path for interest rates, with futures now implying that the Fed funds rate could remain above 4% by July 2027. The U.S. 10-year Treasury yield also moved up to a midweek high of 4.69%, as investors adjusted to the risk that rates may stay higher for longer.

European equities also strengthened as global sentiment improved and investors took comfort from hopes of de-escalation in the Middle East. The Euro Stoxx 50 gained 3.29%, while the UK’s FTSE 100 advanced 2.66%. The macro backdrop was less supportive, with the European Commission lowering its 2026 eurozone growth forecast to 0.9% and raising its inflation forecast to 3.0%. German PPI also rose to 1.7% in April, driven mainly by intermediate goods and mineral oil prices. 

In the UK, labour market data weakened, with unemployment rising to 5.0% in the three months to March and job openings falling to their lowest level in five years. Inflation, however, provided some relief, slowing to 2.8% in April from 3.3% in March and coming in below expectations.

In Asia, Japan led gains as technology and semiconductor shares benefited from the broader AI theme. The Nikkei 225 gained 3.14%, while the broader TOPIX rose 0.74%. Japan’s first-quarter GDP also came in ahead of expectations, expanding at an annualised rate of 2.1%, up from 0.8% in the prior quarter.

Inflation data in Japan was softer than expected. Core CPI slowed to 1.4% year-on-year in April, remaining below the Bank of Japan’s 2% target for a third consecutive month. This reduced near-term pressure on the Bank of Japan to tighten policy, although Japanese government bond yields remained elevated.

Chinese equities ended lower after April activity data suggested that the recovery was losing momentum. The Shanghai Composite fell 0.54%, while the Hang Seng lost 1.37%.Industrial production rose 4.1% year-on-year, slowing from 5.7% in March, while retail sales increased only 0.2%, the weakest growth since late 2022. Fixed asset investment also contracted 1.6% over the January to April period.

The People’s Bank of China left benchmark lending rates unchanged for a 12th consecutive month, with the one-year loan prime rate at 3.00% and the five-year rate at 3.50%. For China, the key issue remains whether targeted policy support will be enough to stabilise domestic demand, particularly as consumer activity and investment momentum remain weak.

Market Moves of the Week:

In South Africa, inflation and the upcoming SARB decision remained the major local focus. April CPI accelerated to 4.0% year-on-year from 3.0% in March, driven mainly by higher fuel prices. This kept attention on whether the latest oil shock could feed into broader inflation pressures. FRA markets were pricing in roughly 25bps of additional tightening, while Standard Bank expects the SARB to hike by 25bps at the upcoming MPC meeting.

The main concern is that higher oil prices could make inflation harder to control, especially if food prices also rise later in the year. Growth also remains under pressure, with weaker manufacturing partly offset by better mining production. Improving port and rail performance remains one of the more positive medium-term developments.

South African government bonds also remained in focus ahead of the SARB decision. Although near-term inflation risks have increased, relatively attractive yields and support from still-elevated commodity prices continue to provide some medium-term support for local bonds.

South African equities ended the week lower as investors remained focused on oil prices, global sentiment and the upcoming SARB decision. The JSE All-Share declined 1.16%, with the Resource 10 falling 4.61% and the Industrial 25 down 0.94%. Year-to-date, the All-Share is down 2.26%.

Chart of the Week:

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According to data released by the U.S. Bureau of Labor Statistics (BLS), U.S. inflation remained elevated in April. Headline CPI rose 0.6% month-on-month, while annual inflation accelerated to 3.8%, the highest level since May 2023, driven largely by higher energy prices. Core CPI also surprised slightly to the upside, increasing 0.4% month-on-month and 2.8% year-on-year, reinforcing concerns around persistent underlying price pressures.

Producer price data released later in the week by the BLS added to the inflationary backdrop, with PPI rising 1.4% in April and annual producer inflation accelerating to 6.0%, supported again by higher energy costs.

Meanwhile, the U.S. Census Bureau reported that U.S. retail sales increased 0.5% in April, moderating from March’s revised 1.6% gain but remaining broadly in line with expectations. Excluding autos, sales rose 0.7%, while the control group measure, which feeds into GDP calculations, increased 0.5%. Gains were driven mainly by gas stations, sporting goods and hobby stores, and electronics retailers.

Kevin Warsh was confirmed by the Senate as the next Chair of the Federal Reserve, replacing Jerome Powell following the expiry of his term on 14 May. Powell will remain on the Fed’s board as a governor, while Warsh is expected to be formally sworn in ahead of the next FOMC meeting in June.

In Europe, eurozone industrial production rose 0.2% month-on-month in March, slightly below expectations. Growth was supported by intermediate and capital goods production, while energy and non-durable consumer goods output declined. Industrial production weakened in Germany, while France, Italy, and Spain recorded increases.

In the UK, political uncertainty intensified as Prime Minister Keir Starmer faced mounting pressure following a series of ministerial resignations, while speculation around a potential leadership challenge from Andy Burnham added to uncertainty around the future direction of the Labour Party.

The Japanese yen weakened to around JPY 158 against the U.S. dollar, from JPY 156.6 at the end of the prior week, as the impact of suspected intervention by Japanese authorities appeared short lived. Market focus remained on the policy divergence between the Federal Reserve and the Bank of Japan, while U.S. officials reiterated that excessive currency volatility is undesirable. 
 
In China, services sector activity expanded at a stronger-than-expected pace in April, with the RatingDog China General Services PMI rising to 52.6 and the composite PMI output index increasing to 53.1. S&P Global noted that the improvement was driven mainly by stronger domestic demand and firmer new business growth despite softer export orders.

Meanwhile, U.S. President Donald Trump and Chinese President Xi Jinping held a two-day summit in Beijing, where discussions centred on maintaining stable bilateral relations and avoiding a renewed escalation in trade tensions. Talks included potential increases in Chinese purchases of U.S. agricultural and energy products, market access for U.S. businesses, and mechanisms to manage disputes around semiconductors and rare-earth supply chains, although no meaningful easing of export restrictions was announced. Taiwan also remained a key issue, with Xi warning that mishandling the matter could damage broader relations between the two countries.

Most major U.S. equity indices ended the week broadly weaker as optimism around large-cap technology and artificial intelligence (AI)-related stocks was offset by concerns over persistent inflation, higher Treasury yields, elevated oil prices, and ongoing geopolitical uncertainty. The Dow Jones Industrial Average declined 0.17% over the week, while the Nasdaq fell 0.08%. In contrast, the S&P 500 posted a modest gain of 0.13%.

 European equities also weakened, with the Euro Stoxx 50 Index declining 1.42% and the UK’s FTSE 100 Index falling 0.37%.

In Japan, the Nikkei 225 Index declined 2.08%, while Chinese equities ended lower after earlier gains faded later in the week, with the Shanghai Composite Index falling 1.07% and the Hang Seng Index declining 1.68%.

Market Moves of the Week:

In South Africa, mining production rose 2.5% year-on-year in March, slowing from February’s revised 9.7% increase and coming in below expectations, as weaker coal and iron ore output weighed on overall production. The data nonetheless pointed to continued resilience in parts of the sector amid a still-supportive commodity price environment.
 
Meanwhile, manufacturing production increased 0.9% year-on-year in March, rebounding from weakness earlier in the year and supported by stronger activity in the food, petroleum, and motor vehicle sectors. The release added to signs that domestic industrial activity may be stabilising despite ongoing logistical and cost pressures.
 
South African markets ended the week lower, with the JSE All Share Index declining 2.84% amid weaker global risk sentiment and higher oil prices. The Resource 10 Index led losses, falling 6.75%, while the Financial 15 and Industrial 25 indices declined 1.14% and 0.69%, respectively. In contrast, listed property outperformed, with the SA Listed Property Index gaining 0.90% over the week. Meanwhile, the rand weakened 1.78% against the U.S. dollar to 16.68/USD.

Chart of the Week:

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U.S. equities advanced over the week as investors took comfort from a resilient corporate earnings season and stronger-than-expected economic data. The S&P 500 gained 2.33%, while the Nasdaq rose 4.51%, reflecting renewed strength in technology and AI-related names. Earnings remained a key support for sentiment, with a large share of S&P 500 companies beating expectations and positive surprises particularly strong in aggregate. Information technology led the market higher, helped by continued optimism around AI infrastructure demand.

The U.S. labour market also remained firmer than expected. Initial jobless claims rose modestly but came in below consensus, while continuing claims declined to their lowest level since 2024. Nonfarm payrolls surprised positively, with April job gains exceeding expectations and March revised higher. This combination of resilient employment, solid earnings and firmer factory orders helped ease concerns that the U.S. economy was losing momentum too quickly. However, the consumer picture was less encouraging. The University of Michigan consumer sentiment index fell sharply, with households increasingly concerned about higher gasoline prices and tariffs. For now, markets appear to be placing more weight on corporate earnings and labour resilience than on softer consumer confidence, but the divergence remains important to watch.

European markets were mixed but generally stable. The Euro Stoxx 50 gained 0.51%, while the FTSE 100 declined 1.26%. Sentiment improved earlier in the week on stronger corporate earnings and easing geopolitical concerns, but tariff uncertainty returned as a source of pressure after renewed U.S. threats toward the EU.

Economic data in Europe was somewhat firmer. German factory orders rose strongly in March, supported by broad-based demand across electrical equipment, data processing equipment and mechanical engineering goods. Eurozone producer prices also increased meaningfully, driven largely by energy prices, which could complicate the inflation outlook. In the UK, the composite PMI improved to 52.6, suggesting that business activity continued to expand, with both manufacturing output and services contributing to the improvement. The key issue for investors remains the policy path. Any renewed pressure from energy prices or tariffs could make the inflation picture less comfortable, while weak growth still limits how aggressively central banks can tighten policy.

Asian markets were stronger over the week. Japan was the standout performer, with the Nikkei 225 rising 5.38% in a holiday-shortened week. Gains were led by technology and semiconductor shares, supported by AI-related demand and lower oil prices, which helped reduce pressure on Japan’s import-heavy economy. The 10-year Japanese government bond yield eased slightly to 2.48%, while real wages rose for a third consecutive month, adding further evidence that Japan’s wage-price cycle is becoming more durable.

Chinese equities also advanced. The Shanghai Composite gained 1.65%, while the Hang Seng rose 2.45%. China’s services PMI improved to 52.6, pointing to resilient domestic demand, although export orders remained under pressure. Holiday travel data showed that domestic trips increased, but spending per trip softened slightly, suggesting that consumer activity is recovering, but still cautiously. For China, the market remains focused on whether domestic demand can offset weaker external demand and ongoing trade uncertainty. Expectations of continued U.S.-China dialogue helped sentiment, but investors remain cautious given the limited likelihood of a major breakthrough.

Market Moves of the Week:

South African markets were broadly positive, with the JSE All-Share gaining 2.35% and Resources rising 7.32%, supported by stronger commodity-linked shares. Financials declined 0.62%, while listed property was marginally positive. The rand strengthened against the dollar, with USDZAR moving down 1.47% over the week, while the South African 10-year yield fell by 0.17%, indicating improved appetite for local assets.

The major local development was Moody’s more constructive view on South Africa’s fiscal outlook. Moody’s said South Africa’s improving fiscal performance and reform momentum should help government debt stabilize this year before gradually declining. The agency currently rates South Africa at Ba2 with a stable outlook. It expects the general government deficit to narrow to 4.3% of GDP in 2026 and 3.8% in 2027, while debt is estimated to have peaked at 86.8% of GDP before easing gradually to 84.9% by 2028.

This is an important signal for local markets. Although South Africa’s debt burden remains high and interest costs still absorb a large share of revenue, the direction of travel appears to be improving. The combination of stronger revenue collection, spending restraint and reform progress has helped rebuild some fiscal credibility. That said, Moody’s also warned that external risks, including the Middle East conflict and its impact on growth and inflation, could still weigh on the outlook. Domestic activity data was also encouraging. The S&P Global South Africa PMI rose to 51.6 in April from 50.8 in March, marking the fastest private-sector growth in 44 months. The improvement was driven by stronger sales, output and new orders, although firms continued to face cost pressures linked to a weaker rand, higher oil prices and freight disruptions.

Chart of the Week:

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US equities delivered solid gains this week, driven by another strong US earnings season. For the week the S&P 500 rose 0.9% while the tech-heavy Nasdaq gained 1.1%, both closing at record highs. April was the standout month with the S&P 500 returning over 10%, its best performance since November 2020.

With more than half of S&P 500 companies having reported, results are coming in robustly. Five of the Magnificent Seven beat or met expectations. Apple surged on strong iPhone demand and resilient China sales. Alphabet jumped on accelerating AI and cloud revenue. Meta fell sharply after announcing another increase in AI capex. ExxonMobil and Chevron beat profit expectations, though their shares were muted as Iran submitted a new peace proposal to mediators, raising hopes for an eventual resumption of Persian Gulf oil exports.

On the data front, US Manufacturing PMI held at 52.7 in April, matching a near four-year high but missing consensus. New orders accelerated, while employment fell at its sharpest pace in four months and input prices surged at the fastest rate since late 2021.

The Federal Open Market Committee (FOMC) held rates steady at 3.50%–3.75%, but the meeting carried more noise than usual. Three voting members dissented against retaining the “easing bias” language, while a fourth voted to cut, the largest number of dissents under Powell. The statement upgraded inflation from “somewhat elevated” to simply “elevated,” adding that this only partly reflects higher energy prices, signalling the Fed sees broader inflationary forces at work. Powell confirmed he will remain on the Board of Governors beyond his tenure as chair, citing ongoing legal proceedings against the Fed. Kevin Warsh has been named as incoming chair.

The Strait of Hormuz remains closed. Oil pulled back on Friday, with Brent crude settling at $108.17/bbl (-2%) and WTI at $101.94/bbl (-3%) on reports of an updated Iranian peace proposal delivered via Pakistani mediators. President Trump said he was not satisfied with the offer, keeping uncertainty firmly in place. Separately, the UAE announced it is leaving OPEC and OPEC+, citing a fundamental disagreement with Saudi Arabia over production strategy. The UAE favours volume maximisation ahead of the energy transition; Riyadh wants supply cuts to protect its fiscal position, a meaningful fracture within the world’s most influential oil alliance.

In Europe, the STOXX 50 ended broadly flat. The European Central Bank (ECB) held the deposit rate, its key rate, at 2% but acknowledged “intensified” economic risks and notably discussed a potential rate rise at length. The Bank of England held at 3.75%, flagging CPI at 3.3% and “highly uncertain” energy price prospects. The UK’s FTSE 100 Index was little changed, with most European markets, with the exception of the London Stock Exchange, were closed for International Workers’ Day on Friday.

In Japan, the Nikkei slipped 0.34% while the yen staged a sharp recovery from ¥160 to ¥156.7 against the dollar following suspected Ministry of Finance intervention. The Bank of Japan held at 0.75% with a hawkish tone.

In China, the Shanghai Composite gained 0.8%, supported by Moody’s revising China’s sovereign outlook to “stable”, while in contrast the Hang Seng declined 0.8%, reflecting softer offshore risk appetite ahead of the Labor Day holiday.

In the week ahead, the US–Iran diplomatic track remains the single biggest variable with global equities, bonds, currencies, and oil continue moving in lockstep with headlines. In the US, the payrolls report dominates the data calendar, while rate decisions are expected from Australia, Sweden, Norway, and Mexico.

Market Moves of the Week:

South African markets delivered mixed signals this week. The JSE All Share declined 1.2% for the week, dragged lower by resource counters, while the rand firmed 0.7% to close at R16.64 against the dollar as markets digested a batch of domestic data.

On inflation, the SARB is holding firm at its 3% target with Governor Kganyago explicitly ruling out any target adjustment despite the fresh oil shock working its way through the economy.

On the data front, producer inflation quickened to 2.3% year-on-year in March, up from 1.8%, with food, petroleum, beverages and tobacco the main contributors. Production costs are expected to rise further in the months ahead as the Middle East conflict keeps fuel prices elevated.

In response, National Treasury extended its fuel levy relief through to 2 June, with diesel receiving an additional 93 cents per litre of relief, reducing the diesel levy to zero. The general petrol levy remains at R1.10 per litre. The relief is designed to be fiscally neutral, with mechanisms to recoup the foregone revenue within the approved fiscal framework. Relief will then be halved and phased out through July.

On the political calendar, President Ramaphosa confirmed that municipal elections will be held on 4 November. The ANC enters the cycle in a structurally weaker position having lost its parliamentary majority in 2024 and governing through a broad coalition making local government outcomes a meaningful gauge of the political landscape heading into the next electoral cycle.

In a potentially significant structural development, the finance ministry has proposed a sweeping overhaul of South Africa’s capital flow rules including raising individual offshore allowances, regulating crypto assets, and allowing asset managers to run non-rand funds from a South African base for the first time. If implemented, the changes could meaningfully bolster South Africa’s standing as a financial hub for the continent.

Chart of the Week:

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