Last week, we wrote saying that many market participants were questioning the gap between stock index record highs and elevated oil prices. That seems to still be the case with the unloved rally in some quarters printing more all-time peaks last week, but an interesting weekly candle printing on charts. Notably the Nasdaq, the tech-heavy index which has been driving broader gains, printed a ‘doij’ with prices closing marginally lower and in the middle of the high-low range over the previous five days. That denotes indecision with neither bulls nor bears winning out amid rising energy prices. The earnings release of the world’s biggest company, Nvidia, should have something to say about the direction of the market, though its impact on the broader indices has increasingly waned.
Will we get any more reaction after the much-hyped Trump-Xi summit? It all felt a little underwhelming truth be told, with markets perhaps looking through POTUS’ incessant discourse, as equities and the CNY both softened on Friday as the summit ended without any major surprises. ‘Constructive strategic stability’ seems to be the key broad theme from the short visit, but ultimately actions speak louder than words. We will be watching for any major breakthroughs towards peace in the Iran conflict and the opening of the Strait, or changes in US arms sales to Taiwan, as they could flag that more progress was achieved behind closed doors than expected.
The push and pull for the dollar we talked about last week finally broke out of its recent range as GBP especially sold off hard on domestic political worries. Bond markets grabbed the headlines as the 10-year gilt rose by more than a quarter percentage point. But this was a global phenomenon with US Treasury yields also rising sharply as well. It seems oil prices are getting more of the market’s attention again, and with them the outlook for central banks, as policy tightening gets increasingly priced in. Can weak economies like the UK and eurozone be able to sustain higher borrowing costs is a key question that lingers in our minds.