Global equities extended their rally, powered by significant technology sector strength and a standout earnings season: S&P 500 Q1 earnings per share (EPS) growth reached +27.7%, double initial expectations. Emerging markets outperformed, led by Taiwan and South Korea.

Beneath the surface, the macro backdrop remains challenging: inflation pressures persist, consumer confidence has hit a record low, and geopolitics are dominating the rate outlook. The Iran conflict continues to drive oil-price and rate volatility, while this week's US-China summit and Consumer Price Index (CPI) data will be the key catalysts to watch.

Credit fundamentals remain solid. Gold is holding firm. The USD is still rangebound.

Macroeconomics

US April payroll data came in slightly stronger than expected (115,000), with the unemployment rate remaining stable at 4.3%. There were modest job losses in the manufacturing sector, contrasting with solid job creation in the transport and healthcare sectors. Other surveys on the labour market (the Automatic Data Processing employment report (ADP), Job Openings and Labor Turnover Survey (JOLTS)) were mixed. Wage growth was 3.6% y/y in April, a tad lower than expected. Overall, these reports confirmed that the labour market conditions remain resilient, which will do little to ease concerns that underlying inflation pressures could persist.

Inflation pressures were clearly seen in the Institute for Supply Management (ISM) services survey where the gauge on prices paid remained very high. The headline index came in broadly as expected, but new orders suggested that demand is getting slightly weaker. This probably means that businesses and consumers are becoming a bit more cautious about spending amid the surge in energy prices. This is consistent with the new decline in consumer confidence, which is currently at a new record low according to the Michigan survey.

In the eurozone, retail sales remained depressed in March, and the final April Purchasing Managers’ Index (PMI) confirmed that services are in contraction mode and that the manufacturing sector continues to expand, supported by rebuilding inventories to anticipate potential supply shortages. We effectively saw that both domestic and foreign demand have caused factory orders in Germany to rebounded strongly.

Turning to central banks, we saw Australia (4.35%) and Norway (4.25%) hiking their key rates by 25 bps, while Mexico cut its rates by the same amount to 6.50%.

This week, developments in the US-Iran conflict will of course continue to take centre stage but, in terms of economic data, the focal point will be tomorrow's US April CPI report. Producer price data follows on Wednesday and then the focus for the remainder of the week shifts towards activity indicators such as retail sales for April, which are expected to show a moderate increase over the month. In the UK, the Q1 gross domestic product (GDP) report will be released and is expected to show a stabilisation in domestic demand. We will also see if UK Prime Minister Keir Starmer will be able to keep his job after the heavy losses by the Labour party in the local elections last week.

On the geopolitical front, the US President’s visit to China from Wednesday will be important; we will see whether this meeting can shape the course of conflict negotiations in the Middle East or if it only adds to the general noise surrounding the issue.

Equities

Global equities chalked up another week of gains (MSCI ACWI total return +2.4%), buoyed by strength in the US (S&P 500 +2.4%, Nasdaq 100 +5.5%) and in emerging markets (MSCI Emerging Markets +6.9%). Both regions were supported by solid gains in the global technology sector (+7.8%, best performing), namely the semiconductor and technology hardware subsectors (+11.2% and +6.2%, respectively), amid continued positive industry newsflow (corporate earnings, AI bottleneck beneficiaries and increased investments). Combined, the two subsectors now account for 71% of the global technology sector.

Emerging markets such as Taiwan (+7.9% last week) and South Korea (+16.9%), whose index exposure is heavily skewed toward semiconductors and technology hardware (approximately 73% and 64%, respectively), have led the region to now have comparable exposure to the technology sector as the US: MSCI Emerging Markets 39% vs. S&P 500 37% (~49% including the Magnificent 7). Strength in the two countries has now led them to account for 46% of the index, surpassing heavyweights China (18%) and India (11%).

The risk-on mood was also supported by positive macro data (US payrolls) and corporate earnings developments, with 89% of S&P 500 constituents having published earnings as of Friday. Q1 EPS growth is now estimated at +27.7% versus the +13.1% expected at the end of March. While results from the Magnificent 7 (Q1 EPS growth +61.0% versus +22.4% expected) represent the vast majority of the upward revision, the remaining 493 companies are also delivering better-than-expected EPS growth: +16.4% (as at 4 May) versus +10.1% expected at the end of March.

Although geopolitical developments and inflation data (US and China) will be key focal points for investors in the week ahead, the recent rally in the global technology sector (+30.4% since the start of April) serves as a reminder of the underlying fundamentals supporting equities: a powerful earnings and investment cycle.

89% of S&P 500 constituents having published earnings; Q1 EPS growth now estimated to be +27.7% versus the +13.1% expected

Fixed income

Fixed income markets ended the week slightly positive as oil prices fell roughly 7% on hopes that a US-Iran deal was within reach: Treasuries returned 0.1%, investment grade (IG) 0.2%, high yield (HY) 0.1%, additional tier 1 (AT1s) 0.3%, and emerging markets (EM) 0.5%, with returns in euros slightly higher, benefiting from the larger rate rally.

The Middle East conflict remains sharply in focus for rates markets, with developed market rates continuing to mirror oil price movements. Reports mid-week that the US and Iran were converging on a memorandum of understanding to end the conflict and reopen the Strait of Hormuz fuelled a brief rally, but Trump dismissed Iran's reply over the weekend as ‘totally unacceptable’: oil was up 3–4% on Monday morning, mirrored by rates rising 2–3 bps.

In credit, US IG spreads remain rangebound near cycle tights. A closer look at the earnings season shows that companies with the most debt are also growing earnings the fastest, pointing to tight spreads persisting despite heavy issuance, while credit fundamentals are keeping pace with larger debt footprints. Technicals are equally supportive, with large fund inflows, strong reinvestment flows and improving foreign demand well-positioned to absorb a near-term supply surge. In HY, USD 12 billion of bonds were priced in last week, making it the second most active week since early December.

The weekend's diplomatic collapse in the Middle East should reset the market's base case towards a prolonged conflict, but the situation remains as fluid as ever. We continue to see the Strait of Hormuz as the key variable: any credible path to its reopening drives a material risk-on move, while a prolonged closure keeps the stagflationary backdrop intact and makes the case for central banks to hike rates.

Companies with the most debt are also growing earnings fastest: credit fundamentals are keeping pace with larger debt footprints

Forex & Commodities

The USD traded sideways last week, with the US Dollar Index stuck in a tight range around the 98 level. USD crosses were also rangebound, and the USD did not benefit from better-than-expected US labour market data. The ADP and non-farm payroll (NFP) data lend credence to the Fed's view that the labour market is stabilising. The main event for the USD this week will be the publication of CPI and PPI data, which are expected to show a rise given energy price effects. Additionally, the US-China leaders’ summit later this week could give scope for further USD/CNY downside, and we note that spot rates have fallen below 6.80 ahead of the meeting.

GBP exchange rates were largely unchanged following the UK local elections, which resulted in steep losses for the governing Labour Party. Markets anticipate that the party will move to replace UK Prime Minister Starmer in the coming weeks, giving significant headline risks for sterling. There are few heavyweight data releases for the GBP over the coming week, and the main highlight is the publication of Q1 preliminary GDP data, which is expected to print at 0.6%.

The CNY faces upside risks over the coming week due to the publication of CPI data, which came in at 1.2% y/y, i.e. well above expectations. The data show that China has definitively exited deflation, justifying the CNY’s appreciation. There are further upside risks for the CNY following the US-China leaders’ summit later this week. We maintain a highly constructive stance on the CNY over the medium term.

Gold continued to trade in a tight range at levels of around USD 4,700 per oz. The World Gold Council noted that central banks purchased 244 tonnes of gold in Q1 – 3% above the 2025 level – showing that concerns of central bank gold sales in March were overdone. We maintain a constructive stance on gold, and we highlight upside risks once the conflict in the Middle East comes to a definitive conclusion.

The USD did not benefit from better-than-expected labour market data; gold continues to trade near USD 4,700 per oz

The opinions expressed herein are correct as at 11 May 2026 and are subject to change without notice. This information should not be relied upon by the reader as research or investment advice regarding any particular fund, strategy or security. Past performance is not a guide to current or future results. Any forecast, projection or target, where provided, is indicative only and is not guaranteed in any way.