Equity markets rounded off the session on a cautiously positive note as investors weighed a combination of encouraging economic data, easing geopolitical concerns and broadly supportive corporate earnings. Resilient labour market figures from the United States, progress in diplomatic talks involving Iran, and continued enthusiasm around artificial intelligence all contributed to a constructive mood across global financial markets.
Market overview
US equities
US stocks finished Thursday’s session modestly higher, supported by a steady macroeconomic backdrop. Initial jobless claims came in broadly unchanged at 209,000, reinforcing the view that the American labour market remains in solid health. Adding to the positive tone, longer-dated Treasury yields dipped, with the 10-year yield falling to approximately 4.57%.
The Dow Jones Industrial Average gained 0.55%, while the S&P 500 and Nasdaq Composite posted more moderate advances. Confidence was further lifted by growing optimism around potential diplomatic progress in the Middle East, which helped ease fears of prolonged energy-driven inflation.
Looking ahead, US equity futures traded modestly higher overnight, buoyed by easing Treasury yields and renewed hopes for diplomatic movement between the United States and Iran.
Asian equities
Asian markets moved higher on Friday, with the MSCI Asia-Pacific ex-Japan index rising 0.3%. Japan’s Nikkei led regional gains, jumping 2% on the back of optimism surrounding potential US-Iran talks and easing inflationary pressures. Gains were broad-based across the region, though uncertainty over the Strait of Hormuz and oil-driven inflation kept volatility elevated.
European equities
European markets closed with a mixed performance. The STOXX 600 edged up 0.2% while the STOXX 50 was essentially flat. Gains in the chemicals sector, including BASF and Air Liquide, helped offset losses in banking stocks such as UniCredit and Intesa Sanpaolo, which came under pressure as yields rose.
Higher oil prices, softer PMI data, ongoing geopolitical tensions and a muted response to Nvidia’s AI-related earnings weighed on broader European sentiment.
Currency and commodity markets
US dollar
The US dollar remained firm on Friday, hovering near six-week highs as safe-haven demand and elevated Treasury yields continued to support the currency. Against the euro, the dollar stayed close to recent lows, with EUR/USD trading around 1.161, putting the euro on track for a monthly decline of approximately 1%.
Oil prices
Oil markets were notably volatile throughout the period. Brent crude fell to $102.58 per barrel on Thursday after hopes of a ceasefire agreement reduced fears of prolonged disruption to global energy supplies, with US crude also declining below $100 per barrel.
However, prices rebounded sharply in early Asian trading on Friday. West Texas Intermediate climbed 1.6% to $94.34, though it remained down 6.6% for the week. Markets continued to track progress in US-Iran peace talks, with ongoing tensions over Iran’s nuclear programme and disruptions in the Strait of Hormuz keeping a floor under prices.
Geopolitical developments
US-Iran talks
Tensions between Washington and Tehran remained elevated after Iran’s supreme leader reportedly barred any transfer of the country’s highly enriched uranium under a proposed peace deal. US President Trump indicated that talks were approaching a final stage, yet both sides continue to maintain firm positions, underlining the fragility of current ceasefire efforts.
Impact on the US economy
US business activity held steady in May, as stronger manufacturing output helped offset weakness in the services sector. However, firms reported surging costs linked to the ongoing conflict and energy price shock. Rising oil prices, weakening demand and reports of job reductions have increased concerns around stagflation. Investors are increasingly worried that the Federal Reserve may be forced to keep interest rates higher for longer in order to bring persistent inflation under control.
Eurozone consumer confidence
Eurozone consumer confidence showed a slight improvement in May. The European Commission’s flash estimate rose to -19.0 from -20.6, exceeding expectations. Sentiment across the broader European Union also strengthened to -18.2. While the data points to modest improvement in household optimism, overall confidence remains in negative territory, reflecting continued caution among European consumers.
Equities in focus
Technology and artificial intelligence
IBM and quantum computing stocks surged after reports emerged that the Trump administration plans to allocate $2 billion in grants to the quantum computing sector. Investors responded positively to growing US government support for quantum technology, with funding expected to benefit companies including D-Wave, Rigetti and GlobalFoundries as Washington reinforces its strategic technology and national security agenda.
Microsoft Corporation is reportedly in early discussions with Anthropic PBC to rent out AI servers powered by its in-house chips, in a potential boost to its semiconductor ambitions. The arrangement would support surging demand for AI computing, reinforce Microsoft’s Maia chip strategy and reduce the company’s dependence on external suppliers including NVIDIA Corporation, as competition in AI infrastructure continues to intensify.
SoftBank Group shares extended strong gains on Friday, rising a further 11% and approaching record highs. Enthusiasm around artificial intelligence, potential IPO activity linked to OpenAI, and continued strength in AI chip equities following robust Nvidia earnings all drove investor interest. SoftBank’s record annual profit further supported the positive momentum.
Enphase Energy shares surged as investors grew increasingly optimistic about potential demand from AI data centres. Analysts highlighted the possible applications of its solid-state transformer technology in future 800V data centre architecture, noting that the total addressable market could reach billions of dollars by 2030.
Media and entertainment
Spotify Technology has entered into a partnership with Universal Music Group, enabling subscribers to create AI-generated covers and remixes. The move represents Spotify’s first licensed AI music creation feature, designed to ensure consent, credit and compensation for artists, while helping the streaming platform compete with dedicated AI music startups and create new revenue opportunities for creators.
Industrial and manufacturing
GE Vernova has agreed to acquire Robotech Automation, a Canada-based robotics and automation integrator, in a move aimed at strengthening its industrial robotics capabilities. The acquisition supports the expansion of GE Vernova’s Advanced Research Centre and its supply chain efficiency programme. Financial terms were not disclosed, with completion expected in early Q3 2026.
USA Rare Earth shares rose after the company was selected to receive up to $19.3 million in funding from the US Department of Energy to support a rare earth processing pilot project. The initiative is part of a broader effort to strengthen domestic supply chains for critical materials used in energy, defence and advanced manufacturing, with the total project value estimated at approximately $50.5 million, subject to finalisation.
Consumer and retail
Walmart delivered revenues ahead of analyst forecasts, with strong performance in e-commerce and advertising. However, shares fell after the company issued earnings guidance that disappointed investors. The results were broadly viewed as mixed: consumer demand and market share gains remain solid, but rising fuel, healthcare and depreciation costs are compressing profit margins and limiting earnings growth.
Deckers Outdoor Corporation issued an annual sales and profit outlook above Wall Street expectations, underpinned by resilient consumer demand for its UGG and Hoka brands. Revenue rose 10% during the quarter, with both brands delivering solid growth. The positive outlook reflects strong brand momentum, continued product innovation and healthy global demand.
Healthcare
Eli Lilly shares advanced following positive results from a late-stage clinical trial for its obesity drug, retatrutide. Patients achieved an average weight loss of 28.3%, with many exceeding 30%, a level considered comparable to the outcomes of bariatric surgery. The triple-hormone therapy is expected to support a regulatory approval application and a potential market launch next year, further strengthening Eli Lilly’s position in the fast-growing obesity treatment market.
Automotive
Stellantis shares declined after the group unveiled a 60 billion euro five-year strategic plan centred on electric, hybrid and combustion vehicles. The plan targets significant cost reductions, improved platform efficiency and stronger regional growth, with investment focused on key brands including Jeep, Ram, Peugeot and FIAT, alongside expanded global partnerships.
Institutional investor activity
Hedge funds have begun taking profits on US semiconductor shares following a sharp AI-driven rally, according to Goldman Sachs. Despite reducing chip holdings, funds remain substantially invested in AI and broader technology. Portfolio managers are also increasing market hedges, signalling caution over wider risks rather than any fundamental loss of confidence in long-term AI growth.
Morgan Stanley has flagged concerns that IT hardware shares are trading at stretched valuations and face rising cyclical risks. The firm anticipates potential negative earnings revisions in the second half of the year, citing memory cost inflation, supply shortages and macroeconomic uncertainty. Morgan Stanley sees downside risk for HPQ and NetApp, while maintaining a more constructive view on Dell, HPE and Xerox.
Upcoming economic events and earnings
Several notable data releases and corporate earnings are scheduled for Friday. Key UK retail sales figures are due alongside German consumer confidence and business climate data. In the United States, the University of Michigan consumer sentiment index and inflation expectations survey will be published, along with leading economic indicators and rig count data. Markets will also be watching a Federal Reserve speech from Governor Waller for any signals on the interest rate outlook.
On the earnings front, scheduled results include Compagnie Financiere Richemont, Sun Pharmaceutical Industries and Booz Allen Hamilton.
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