Overview: A Bullish Week for US Markets
U.S. equities concluded the week on a strong note, with the S&P 500 recording its fifth consecutive daily gain by Friday. The index rose by 0.7 percent to end the week at 5,958.4. Meanwhile, the Dow Jones Industrial Average climbed 0.8 percent to finish at 42,654.7, and the Nasdaq Composite gained 0.5 percent, closing at 19,211.1. Investor confidence was broadly lifted, with all major sectors finishing in positive territory except for energy. The healthcare sector led the upward momentum.
The rally was significantly driven by an encouraging development in U.S.-China relations, where recent productive talks in Geneva resulted in a 90-day suspension of most tariffs. In addition to this geopolitical easing, industrial giants such as 3M and Caterpillar received favourable analyst upgrades, further fuelling market optimism.
Key Drivers of the Rally
Optimism among investors was supported by a combination of positive developments. The truce in U.S.-China trade tensions brought a sense of geopolitical relief. Rebounding technology stocks and relatively firm economic indicators also played their part. Although hard data such as housing starts and retail sales held steady, soft indicators reflected some underlying caution. Consumer sentiment reached its lowest point in nearly three years. Despite this, softer-than-expected Consumer Price Index (CPI) and Producer Price Index (PPI) readings signalled a reduction in inflationary pressure, raising hopes for interest rate cuts in the months ahead. This alignment of geopolitical stability, resilient fundamentals, and a more dovish monetary policy outlook drove a broad-based advance in U.S. equities.
Weekly Performance Snapshot
Over the week, the Nasdaq surged by 7.2 percent. The S&P 500 followed with a rise of 5.3 percent, while the Dow Jones recorded a gain of 3.4 percent. This collective performance marked one of the stronger weekly showings of the year.
Global Markets React to Moody’s Downgrade
Asia: Sentiment Shaken by Credit Concerns
Asian stock markets mostly began the new week on a downward trajectory following Moody’s downgrade of the U.S. credit rating to Aa1. This move, combined with a mix of underwhelming economic data from China, raised fears about the pace of global growth. Stock exchanges in China, Japan, South Korea, Singapore, and Hong Kong all experienced declines. In contrast, Australia’s ASX 200 remained relatively flat as investors awaited an important interest rate decision.
Europe: Caution Prevails Amid Corporate Developments
European markets ended the previous week on a softer note, with the STOXX 600 falling by 0.3 percent. Market sentiment was impacted by leadership changes at Novo Nordisk and muted forecasts from companies such as Cisco and Allianz. Shares of Novo Nordisk fell by 1.8 percent following the unexpected dismissal of CEO Lars Fruergaard Jørgensen, amid growing concerns over increasing competition in the obesity drug sector. Allianz also experienced a downturn after HSBC revised its rating to “Hold”, citing a slowdown in pricing momentum and limited near-term upside potential.
Currency and Commodities Update
The U.S. dollar index slipped to approximately 100.7 following the downgrade by Moody’s and weaker-than-expected economic data. These factors strengthened expectations of Federal Reserve interest rate cuts later this year. Meanwhile, the euro gained some traction against the dollar, with the EUR/USD exchange rate hovering near 1.1185. The euro’s performance was supported by relative economic stability within the Eurozone and continued dollar softness amid U.S. fiscal concerns.
Oil prices moved slightly lower during Asian trading sessions. Market sentiment was weighed down by oversupply worries linked to ongoing U.S.-Iran nuclear negotiations and increased production from OPEC+. Brent crude declined by 0.3 percent to reach $65.20 per barrel, while West Texas Intermediate (WTI) also dropped 0.3 percent to settle at $61.77. Additional market uncertainty stemmed from Moody’s downgrade of the U.S. credit rating and the upcoming Trump-Putin talks concerning the Russia-Ukraine conflict.
China’s Economic Picture
China’s April data showed weaker-than-expected retail sales and fixed-asset investment, reinforcing concerns over sluggish consumer and business spending. Industrial production beat expectations but slowed compared to March’s pace, while a slight dip in the unemployment rate pointed to modest stability in the labour market.
U.S. Credit Concerns Deepen
Moody’s downgraded the U.S. sovereign credit rating to Aa1 due to concerns over the country’s soaring $36 trillion debt and persistent fiscal deficits. The move complicated President Trump’s efforts to pass tax cuts, adding a political dimension to the economic concerns. This downgrade follows earlier actions by Fitch and S&P, and has raised fears of higher borrowing costs, increased market volatility, and investor unease over the country’s long-term financial trajectory.
Company Highlights and Market Movers
Several notable companies experienced share price movements influenced by analyst recommendations, earnings results, and other significant developments.
- Walmart announced that it would not be able to fully absorb the costs of U.S.-imposed tariffs on Chinese imports, citing its already narrow profit margins. President Trump criticised the retail giant, arguing that its high profits should allow it to shoulder the tariffs rather than passing the cost to consumers. This exchange highlighted ongoing tensions between the administration and leading U.S. retailers.
- Novo Nordisk made headlines with the sudden removal of CEO Lars Fruergaard Jørgensen. Despite a successful tenure, his departure underscored growing concerns over losing market leadership in the obesity drug segment, especially as competitor Eli Lilly continues to make gains. The company also faces challenges related to a less promising drug pipeline, patent expirations, and pricing pressures.
- Cisco Systems was downgraded to Neutral by analysts at New Street Research, who suggested that the stock’s post-downturn recovery had largely run its course. Although Jefferies acknowledged the company’s strong third-quarter results and stable growth, they cautioned against further near-term gains due to margin pressures and a relatively high valuation.
- UBS revised its outlook on Caterpillar, upgrading it to Neutral from a previous Sell recommendation. The upgrade came amid easing trade tensions between the U.S. and China and improving macroeconomic indicators. While earnings prospects have brightened, UBS noted that broader economic uncertainty and residual tariff risks may still limit upside.
- HSBC downgraded Allianz to a “Hold” rating, reducing its price target to €370. The downgrade followed a detailed review of the company’s Property and Casualty segment, which has seen a moderation in pricing momentum. With the company’s shares already trading near the top of management’s guidance range, HSBC took a more cautious stance.
- Carnival received a rating upgrade from HSBC, moving from Reduce to Hold. The bank cited a solid performance in the first quarter, improved profitability, and progress in reducing debt levels as key factors. With better EBITDA margins and lower financial gearing, earlier concerns appeared to have eased.
- Michael Burry’s Scion Asset Management made a notable move by increasing its stake in Estée Lauder to $13.2 million. This decision reflected confidence in the company’s new leadership, especially as Estée Lauder continues to navigate tough market conditions. The company’s exposure to the Chinese market, where it earns nearly one-third of its revenue, stands to benefit from recent tariff reductions.
- Renk was upgraded to Overweight by JPMorgan, with the firm doubling its price target to €70 for December 2026. The upgrade followed stronger-than-expected order growth and a favourable long-term outlook. Rising European defence spending, particularly in Germany, supported the forecast. Despite a slight revenue shortfall in the first quarter, JPMorgan projected a recovery in margins, with EBITA expected to hit 19.5 percent by 2027 and net income reaching €226 million.
- Suedzucker faced a downgrade from S&P Global Ratings to ’BBB-/A-3’. The decision was driven by slower progress in reducing debt and weaker credit ratios due to underperformance in its sugar segment. However, the company remains financially secure, with no significant refinancing needs until 2027 and expectations of improved credit metrics thereafter.
Economic Outlook and Data to Watch
This week in the United States is expected to be relatively calm, with attention likely to remain on further tariff-related developments, scheduled speeches from Federal Reserve officials, and key indicators such as S&P Global PMIs and housing sales data.
Globally, investors will be monitoring economic indicators and central bank decisions. China’s upcoming data releases and interest rate announcement, along with inflation and trade figures from Japan and Europe, will be closely watched. Additionally, central bank updates from Australia and Canada are anticipated to influence market sentiment.
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