US Equities Rally on Positive Employment Figures
Global stock markets closed last week on a high note, driven by robust US labour data and fresh hopes for progress in US-China trade negotiations. Major US indices delivered impressive gains: the Nasdaq Composite rose 1.2% to 19,530, the Dow Jones Industrial Average advanced 1.1% to 42,762.9, and the S&P 500 closed up 1% at 6,000.4, marking its first finish above that level since February.
All sectors posted positive returns, led by energy and communication services. The upbeat sentiment was sparked by the better-than-expected addition of 139,000 nonfarm payrolls in May, reflecting continued strength in the labour market. The unemployment rate held steady at 4.2%, in line with expectations, while recent data revisions and a dip in labour force participation pointed to a more nuanced jobs picture.
Outlook: Key Challenges Loom Despite Momentum
Looking ahead, while equities carry forward significant momentum into the summer, several hurdles could trigger short-term volatility. Trade negotiations between the US and China are back in the spotlight, especially as self-imposed deadlines on tariff pauses approach.
The Federal Reserve is widely expected to hold rates steady at its June meeting. However, September is increasingly seen as a likely window for a potential rate cut, particularly if economic data begins to soften. Meanwhile, fiscal policy debates in the US, particularly around the debt ceiling and proposed tax reforms could contribute to market uncertainty.
Still, solid corporate earnings, broadening global equity participation, and subdued inflation continue to support a favorable environment for risk assets. A balanced strategy between growth and value equities remains prudent for investors navigating the current landscape.
Latest Market and Economic Updates
Asia Gains Despite Chinese Economic Headwinds
Most Asian equity markets opened higher on Monday, fuelled by optimism over upcoming US-China trade talks, even as China’s weak inflation data highlighted persistent economic strain. South Korea’s KOSPI led the region, followed by gains in Japan’s Nikkei, which rebounded after a smaller-than-expected GDP contraction. Australian markets were closed due to a public holiday.
Steady Start for US Futures Ahead of Busy Week
US equity futures traded flat overnight, as investors geared up for a data-heavy week that includes inflation reports and renewed U.S.-China trade discussions in London. Tech sentiment may also be swayed by announcements at Apple’s Worldwide Developers Conference.
European Markets Edge Higher
On Friday, European shares closed slightly higher, with the STOXX 50 and STOXX 600 both gaining 0.2%. Strength in global trade sentiment and upbeat US job data bolstered the region. Among individual movers, UBS rose after Switzerland proposed stricter capital rules, while Adidas and Puma slipped following a profit warning from Lululemon.
Currency and Commodities Update
The US Dollar Index dipped to 99, reflecting investor caution ahead of critical economic releases. The euro strengthened to 1.1416, buoyed by renewed hopes for trade progress and expectations of softer US inflation data.
Oil Holds Steady on Trade and Demand Concerns
Oil prices were steady in Asian trading, as markets awaited updates on US-China trade talks and Chinese inflation and trade data. Despite strong gains last week, investors remain wary of weak Chinese demand and increasing OPEC+ output, which could limit further price rises.
Trade and Politics in Focus
China reported a $103.22 billion trade surplus for May, as modest export growth contrasted with a sharp fall in imports due to sluggish domestic demand. While exports outside the US remain resilient, high US tariffs continue to hinder overall trade performance. Trade talks between the US and China are set to resume in London.
Trump vs Musk: Political Feud Intensifies
Donald Trump confirmed on Saturday that his relationship with Elon Musk is effectively over, warning of “serious consequences” if Musk funds Democrats opposing his flagship tax and spending bill. This feud follows Musk’s strong criticism of the legislation, which narrowly passed the House and is under Senate review. Trump remains confident it will pass by Independence Day.
Trump Criticizes Fed, Calls for Aggressive Rate Cut
President Trump sharply criticised Fed Chair Jerome Powell, demanding an urgent 1 percentage point rate cut and calling him “Too Late.” He warned that maintaining current rates is increasing government borrowing costs and threatening the economy. Fed officials still plan to keep rates steady amid ongoing uncertainty.
Equities on the Move
- Meta Platforms is reportedly in discussions to invest over $10 billion in Scale AI, a data-labeling startup already backed by Nvidia, Amazon, and Meta, according to Bloomberg. Terms are not final, but the deal could deepen Meta’s AI involvement.
- Regulatory risks for Google are rising as a US antitrust decision is expected by late July, with remedies possibly starting in October. Barclays warned this could cut up to 20% of global profit and increase the odds of a forced sale of Chrome.
- The Swiss government proposed stricter capital rules for UBS after its Credit Suisse acquisition, potentially adding $26 billion to its core capital. UBS called the plan “extreme,” warning it could hurt competitiveness and force a business plan review, including possible asset sales or relocation.
- President Trump is expected to sign an executive order delaying the enforcement of a law that could ban or force the sale of TikTok. This is the third extension since January, with any resolution unlikely until US-China tensions ease.
- Gene Munster believes the Trump-Musk feud may pressure Tesla’s shares short-term, but not affect long-term plans like its robotaxi pilot service launching June 12 in Austin. He noted risks to tax credits and Tesla’s brand, and sees Waymo and Tesla as key players in future ride-sharing.
- Wells Fargo named Shopify its signature pick, raising the target to $125, citing AI integration and “agentic commerce” potential. It also favored Citigroup for its restructuring, aiming to improve efficiency and reduce costs through 2026.
- Bernstein downgraded CrowdStrike to Market-Perform, citing valuation concerns despite strong fundamentals. They suggested Palo Alto Networks may offer better value with 15% upside.
- Morgan Stanley upgraded Applied Materials to Equal-Weight, citing a de-risked China/ICAPS outlook, but cautioning over logic and DRAM weakness in FY2026. Export risks to China remain, though Intel and Samsung investments may offer upside.
- Deutsche Bank downgraded Allianz to “Hold,” citing limited upside despite solid financials and market strength. Valuation was considered less attractive than peers.
- Citi Research downgraded Airbus SE to “Neutral” from “Buy,” cutting the target from €209 to €183 due to euro strength. The stronger euro raises costs vs. dollar-denominated sales, despite Airbus’s currency hedging.
Upcoming Economic Events to Watch
This week, markets await several key indicators:
- US CPI and PPI inflation reports
- University of Michigan’s consumer sentiment index
- China’s inflation and trade data
- UK GDP and labour market figures
- Inflation updates from Mexico, Brazil, Russia, and India
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