The Week That Was

It was a solid week for equities as continued strength in AI and a sharp step-up in IPO activity acted as a positive tailwind for investor sentiment. The S&P 500 closed up 1.6% with the Information Technology sector (+3.1%) the stand-out performer, led higher by Oracle, up 25%, buoyed by growing demand for cloud services from AI companies, including a $300bn order from OpenAI. Sentiment was also lifted by the $4bn raised in IPOs, marking the busiest week for US flotations in four years, which included European fintech Klarna.

European equities climbed 1.0%, buoyed by the appointment of a new PM in France combined with an upgrade to this year’s Eurozone GDP expectations to 1.2% (prior: 0.9%) by the ECB. These updates were well received by investors and were enough to offset a more hawkish tone from the ECB President on the path for rates going forward as the bank left the policy rate unchanged.

Across the Atlantic, US inflation data for August was in line (core CPI 3.1% YoY) with expectations as producers struggled to pass on price increases to consumers. This, combined with a significant downward revision to employment data and weak consumer sentiment, saw the dollar post its biggest weekly slide in a month. Gold consolidated following its recent rally above $3,600 while oil prices climbed 1.3% on risks of a broadening Middle Eastern conflict.

The Week Ahead

Markets have started the week on the front foot in Asia with equities in Hong Kong and Shanghai both higher while Tokyo is closed for a public holiday. The strength in China reflects optimism over US trade talks that continue in Madrid today, which, combined with soft economic data releases for August, increases the likelihood of stimulus if the National People’s Congress of China is to hit its 5% growth target this year.

Economic and political developments will likely be the dominant drivers of market sentiment in the week ahead. President Trump will have both the CEO of Nvidia and OpenAI as part of his delegation when he begins his state visit to the UK on Tuesday, with hopes high among the Labour government that announcements of tech and energy deals will be forthcoming. Tuesday is also likely to see confirmation that US core retail sales climbed 0.5% YoY for August.

On Wednesday, the BOE is expected to keep rates on hold given its hawkish pivot last month but could slow the pace of its balance sheet run-off. The Fed, in contrast, is widely expected to cut rates by 25bps for the first time in almost a year with market focus likely to centre on Chair Powell’s comments on the pace and scale of any additional stimulus from here. Finally, on Friday, Japanese core inflation for August is set to come in at 3.3% YoY, which should see the BOJ signal that a rate hike in October is all but assured.

Corporate earnings releases will be light this week; however, there will still be some market-moving updates. In the US, a key barometer of the global economy, FedEx, will release earnings that will garner significant attention with investors particularly keen to hear how the end of the tariff exemption for small package shipments is impacting demand and to assess progress on the firm’s Drive cost-reduction programme. Updates from Darden Restaurants and homebuilder Lennar will also provide insights into the strength of the US consumer while Meta is set to unveil its next-generation smart glasses at its AI/VR conference later this week. Closer to home, Greencoat Renewables released a broadly in-line set of interim results this morning.

Key Market-Moving Events This Week

• Macro – US, UK and Japanese interest rate decisions
• Corporate updates – FedEx, Meta, Greencoat
• Political developments – US-China trade negotiations, Trump state visit to UK

This is an extract from the Weekly Markets Report by Cantor Fitzgerald Ireland. For more detail on individual securities or to discuss how we can support your investment needs please get in touch.

Written by John Mullane, CIO, Cantor Fitzgerald Ireland