In summary
- The relief rally continues
- Progress in geopolitics, but far from resolution
- Inflation relief supports the narrative
- The week ahead
The relief rally continues
Markets closed the week on a firm footing, supported by rising expectations of a de-escalation between the US and Iran. Oil prices fell sharply, with Brent down over -11% across the week, easing concerns around a potential supply shock through the Strait of Hormuz. Lower energy prices fed through into softer inflation expectations and prompted a meaningful repricing of central bank policy, with markets paring back the likelihood of further Fed tightening. Against this backdrop, both equities and bonds advanced. The S&P 500 notched a ninth consecutive weekly gain, while sovereign bond yields moved lower as investors lowered near-term interest rate expectations.
Progress in geopolitics, but far from resolution
While sentiment has improved, the path towards de-escalation remains fragile. Reports suggest negotiations between the US and Iran are progressing, centred around the reopening of the Strait of Hormuz. However, clarity on the details remains limited, with key sticking points such as uranium stockpiles and sanctions relief still unresolved. Mixed messaging from both sides has led to short bouts of volatility. Although some shipping activity in the region has resumed, a sustained period of stability will be needed before conditions fully normalise. For now, markets appear willing to give the benefit of the doubt, but confidence remains conditional on continued progress.
Inflation relief supports the narrative
Alongside geopolitics, softer inflation data has reinforced the more constructive tone. US PCE inflation surprised modestly to the downside, helping to ease concerns about persistent price pressures, particularly in services inflation. This, combined with falling energy costs, has supported the view that inflation may gradually moderate, even as underlying dynamics remain uneven. Central bank expectations have adjusted accordingly, with rate hike probabilities declining notably over the course of the week. Importantly, recent economic data continues to point to a slowing but resilient backdrop, with consumer activity holding up better than some surveys had suggested.
The week ahead
Looking ahead, markets will need confirmation that the two key pillars underpinning the recent rally remain intact: easing geopolitical risk and stable economic growth. Developments in the Middle East will stay front of mind, particularly any progress towards formalising a deal or ensuring uninterrupted access through the Strait of Hormuz. At the same time, attention will turn back to macro data, with the US employment report and ISM manufacturing survey providing important signals on the health of the economy. With equity markets at record highs and recent optimism already reflected in prices, further gains are likely to depend on continued evidence that both the geopolitical and macro backdrop are moving in the right direction.
Contact us
0203 418 0257
info@onekc.co.uk
References
Source: https://www.brooksmacdonald.com/resources/insights/weekly-market-commentary
Weekly Market Commentary
In summary
The relief rally continues
Markets closed the week on a firm footing, supported by rising expectations of a de-escalation between the US and Iran. Oil prices fell sharply, with Brent down over -11% across the week, easing concerns around a potential supply shock through the Strait of Hormuz. Lower energy prices fed through into softer inflation expectations and prompted a meaningful repricing of central bank policy, with markets paring back the likelihood of further Fed tightening. Against this backdrop, both equities and bonds advanced. The S&P 500 notched a ninth consecutive weekly gain, while sovereign bond yields moved lower as investors lowered near-term interest rate expectations.
Progress in geopolitics, but far from resolution
While sentiment has improved, the path towards de-escalation remains fragile. Reports suggest negotiations between the US and Iran are progressing, centred around the reopening of the Strait of Hormuz. However, clarity on the details remains limited, with key sticking points such as uranium stockpiles and sanctions relief still unresolved. Mixed messaging from both sides has led to short bouts of volatility. Although some shipping activity in the region has resumed, a sustained period of stability will be needed before conditions fully normalise. For now, markets appear willing to give the benefit of the doubt, but confidence remains conditional on continued progress.
Inflation relief supports the narrative
Alongside geopolitics, softer inflation data has reinforced the more constructive tone. US PCE inflation surprised modestly to the downside, helping to ease concerns about persistent price pressures, particularly in services inflation. This, combined with falling energy costs, has supported the view that inflation may gradually moderate, even as underlying dynamics remain uneven. Central bank expectations have adjusted accordingly, with rate hike probabilities declining notably over the course of the week. Importantly, recent economic data continues to point to a slowing but resilient backdrop, with consumer activity holding up better than some surveys had suggested.
The week ahead
Looking ahead, markets will need confirmation that the two key pillars underpinning the recent rally remain intact: easing geopolitical risk and stable economic growth. Developments in the Middle East will stay front of mind, particularly any progress towards formalising a deal or ensuring uninterrupted access through the Strait of Hormuz. At the same time, attention will turn back to macro data, with the US employment report and ISM manufacturing survey providing important signals on the health of the economy. With equity markets at record highs and recent optimism already reflected in prices, further gains are likely to depend on continued evidence that both the geopolitical and macro backdrop are moving in the right direction.
Contact us
0203 418 0257
info@onekc.co.uk
References
Source: https://www.brooksmacdonald.com/resources/insights/weekly-market-commentary
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