Global equities advanced, driven by strong US technology earnings, while fixed income markets slipped as yields moved higher and central banks maintained a cautious stance.

Foreign exchange (FX) saw a weaker USD amid Japanese intervention and a stronger AUD, and gold consolidated below recent highs despite still solid underlying demand.

Macroeconomics

In the last week, many economic data releases provided important information about the current state of the economic cycle.

In the US, Q1 gross domestic product (GDP) came in lower than expected at 2.0%, but private domestic demand was sustained (up by 2.5%), supported by services and strong momentum in artificial intelligence (AI) investment. The momentum in defence and AI investments remained positive in April, with a strong rise in core durable goods orders (3.3% month-on-month (m/m)) and constructive business confidence (Purchasing Managers' Index (PMI), Institute for Supply Management (ISM) index). Core personal consumption expenditures (PCE) were in line with expectations, up by 0.3% m/m and 3.2% year-on-year (y/y).

In the eurozone, Q1 GDP came in slightly lower than expected at 0.1% q/q, with large disparities among euro area members: French GDP was flat, while it was up by 0.3% in Germany, 0.2% in Italy, and 0.6% in Spain. Some weakness is likely in Q2, as business and consumer confidence both decreased significantly in April. The first estimates of April inflation confirmed the rising trend in place, namely 3.0% y/y after 2.6% y/y the prior month, but core inflation remained limited (up by 2.2% y/y).

Central banks published relatively hawkish communications, reflecting concerns about inflation, but a wait-and-see strategy prevailed. The Federal Reserve (Fed) left its policy unchanged, but the Federal Open Market Committee (FOMC) was divided regarding forward guidance, with some governors shifting from a previous easing bias to a more neutral stance on rates. The European Central Bank (ECB) and the Bank of England (BoE) also left their policies as they were, but stayed vigilant on inflation, and the ECB is likely preparing to hike rates in June.

This week, the focus will be on US labour data (ADP, Job Openings and Labor Turnover Survey (JOLTS), and non-farm payrolls (NFP)): job creation is expected to slow to around 65,000 (vs. 178,000 in the previous month), while the unemployment rate is expected to remain stable at 4.3%.

Several countries’ central banks will hold their regular meetings this week, namely Australia, Poland, Mexico, Norway, Sweden, Malaysia, and Czechia.

Equities

Global equities registered gains last week (MSCI ACWI total return: +0.8%) despite conflicting headline information, including an increase in Brent crude prices, which briefly broke through the USD 120 per barrel threshold, hawkish central bank meetings on both sides of the Atlantic, and the lack of a resolution to the US–Iran conflict.

US equities led the gains once again last week (S&P 500: +0.9%, Nasdaq: +1.1%) and closed out April with their best monthly gain since November 2020 (+10.5%). A key performance driver has been strength in the technology sector (+17.5%), along with the Magnificent 7 (+14.9%). Five of the latter (Alphabet, Amazon, Apple, Meta, Microsoft) reported Q1 earnings last week, with results beating expectations across the board, while also demonstrating accelerating revenue growth and reassuring investors that extensive AI-related investments are starting to pay off. Capital expenditure from these companies was also revised up and now totals over USD 700 billion so far in 2026.

Earnings strength from the group has now propelled expected Q1 EPS growth for the S&P 500 to +27.1%, versus +15.1% expected one week ago, and +13.1% expected at the end of March. While the path forward for equity markets is not without obstacles, corporate earnings growth provides a reliable anchor for investors. Another 25% of S&P 500 constituents will publish earnings in the week ahead, with near-term geopolitical developments also putting the old Wall Street adage, ‘sell in May and go away’ to the test.

While the path forward for equity markets is not without obstacles, corporate earnings growth provides a reliable anchor for investors.

Fixed income

Fixed income markets ended last week slightly negative, in a context where investors continued to weigh the impact on rates of the ongoing geopolitical tensions in the Middle East. Safer bonds, such as US Treasuries and investment grade, fell about 0.2% during the week, while higher-risk bonds (high yield (HY), additional tier 1 (AT1s), and emerging markets (EM)) stayed roughly flat.

The Fed held rates at 3.50–3.75% on Wednesday in a decision that produced four dissents, including three regional Fed presidents (Minneapolis, Cleveland and Dallas) who were leaning more towards a hike, and Governor Miran arguing instead for a 25-bp rate cut. Markets are now pricing in no rate moves for the remainder of 2026.

Rates rose modestly across the board as oil spiked above USD 110 per barrel during the week. US 2-year and 10-year yields were up 10 bps and 7 bps, respectively, with similar moves on Bunds in Germany, while 10-year gilt yields briefly surpassed the psychological 5% threshold, aided by rising political risks. This week there are local elections in the UK that could present a setback for Keir Starmer and the Labour Party.

In Europe, the ECB also left rates on hold at 2% after a unanimous Governing Council decision, while members flagged up growing concerns about eurozone inflation. President Lagarde indicated that the option of rate hikes in 2026 is already part of policymakers’ discussions.

Markets are now pricing in no rate moves for the remainder of 2026.

Forex & Commodities

Last week, the US dollar index weakened by over 1.5%. The decline reflected modest EUR appreciation following the ECB meeting and Japanese FX intervention efforts, which involved large USD sales. The USD did not move much following the FOMC meeting, despite the shift towards a less dovish stance. Two-year yield spreads rose slightly in favour of the EUR, but they remain well within recent ranges. The main event for the USD over the coming week is the publication of US labour market data (JOLTS, ADP and NFP). The data could have less impact than before, given rising inflation risks and the Fed’s less dovish stance. Overall, no big moves are expected for the USD, barring a large downside surprise to the NFP data.

Last week, the AUD/USD traded higher to levels of around 0.72, with Australian data over the week being constructive. Q1 consumer price index (CPI) data printed in line with expectations at 3.3% y/y (core) and 1.4% q/q (headline). Over the coming week, the Reserve Bank of Australia’s (RBA) Monetary Policy Committee (MPC) meeting is likely to raise its cash rate to 4.35%, up from 4.10%. A 25-bp rate hike has been priced in with a 75% probability, and the RBA’s rhetoric has generally been on the hawkish side. Two-year spreads point to more AUD/USD upside, and a move above 0.72 cannot be ruled out, giving room for a continuation of the upward move towards 0.74.

The JPY rose aggressively last week following Japanese FX intervention efforts. It is not a coincidence that the intervention followed a renewed rise in oil prices to levels of around USD 120 per barrel. The Bank of Japan (BoJ) is clearly trying to reduce imported inflation effects, explaining this intervention. A campaign of interventions is not anticipated, given its finite stock of USD reserves; however, investors should view levels of around 160 as being at the upper end of the BoJ’s tolerance for USD/JPY exchange rates.

Gold traded lower to levels of just under USD 4,600 per oz. The decline reflects higher front-end interest rates and a change in central bank language, which is moving towards a less accommodative stance. Once markets have some clarity on the eventual end to the US–Iran war, this should result in more upside. The conviction remains that gold will rise to levels of USD 6,000 per oz over time, given strong underlying demand from central banks and retail investors.

Overall, no big moves are expected for the USD, barring a large downside surprise to NFP data.

The opinions expressed herein are correct as at 4 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.