Markets are in a fascinating phase right now with many questioning the gap between stock market record highs and oil prices which remain elevated above $100 and well above pre-war levels. It seems we have now moved from early panic when the conflict kicked off, through some sort of stabilisation and acceptance of risk, to now an earnings‑led and data resilience, especially in the US. Rates and FX remain in that middle phase, while equities have moved into that final phase. Put differently, rates have taken their cues from inflation, stocks much more so from the earnings and growth outlook.
What has also grabbed the headlines have been some of the tech moves. Memory shortages and AI capex stacked with broader silicon enthusiasm have taken chipmakers parabolic – Micron was up more than 37% last week alone – and this saw the Nasdaq print more record highs. (as a side note, Alphabet could become the biggest company in the world by market cap.) History tells us price action of this type will mean revert at some point, with momentum funds and Asian retail buying all adding to the bullish mix and prone to correction. It also presumes the Trump/Xi meeting will likely lead to some agreement on current tech curbs, so those talks could be key for markets at the end of the week.
In macro, April non-farm payrolls hit +115K, the second straight beat. Wall Street took it as proof the labour market is fine without rate cuts, which the Fed seems to be increasingly happy to oblige. But the real news is that policymakers are looking down the barrel at new leadership, and little reason to cut rates any time soon. We note Jerome Powell’s final day as Federal Reserve Chair on Friday, with Kevin Warsh taking over. The push and pull for the dollar is ongoing as interest rate differentials and China and Japan FX policy are hurting USD but US tech/AI and economic exceptionalism are bullish USD. US Treasury Secretary Bessent is in Japan on Tuesday before he leaves for China on Wednesday, so we will be watching for any headlines Tuesday p.m Japan time regarding FX and USDJPY.