The prior Friday stocks had seen their steepest sell-off since April as Trump had threatened a 100% tariff on Chinese imports, but over the weekend it appeared the two sides were back on track to meet at the end of the month. Nevertheless, trade sentiment remained in a delicate balance, with stocks back under pressure on Tuesday as Trump posted he was considering ending some trade ties with China, as well as tit-for-tat port fees coming in to effect.
Major bank earnings were generally positive, however regional banks came under pressure on Thursday. There were concerns after some banks revealed they had been hit by bad or fraudulent loans. Despite the volatility, US markets managed to log weekly gains. The S&P 500 was up 1.7% and the Dow Jones Industrial Average added 1.6%. The Nasdaq Composite rose 2.1%, with ongoing optimism around artificial intelligence including news that OpenAI is partnering with Broadcom. Federal Reserve chair Jerome Powell noted that downside risks to employment have shifted the balance of risks in the economy, indicating that the central bank remains on track to cut rates. US Treasury yields declined over the week, with the 10-year yield dropping below 4% on Thursday, reaching its lowest level since October 2024.
European markets ended higher for the week, with the STOXX 600 ending modestly higher, up 0.4%. Similar to the US, it benefited from the improved trade narrative and more dovish Fed comments, whilst being unnerved by the US regional banks. Within the region earnings were in focus, with the luxury sector buoyant following positive results from LVMH and EssilorLuxottica. French stocks outperformed with the CAC 40 index gaining 3.2%, its best performance in almost six months. It found support after Prime Minister Lecornu survived no confidence motions.
Japanese equities declined over the week, with the Nikkei 225 down 1.1% while the yen strengthened. There was also political uncertainty after the Komeito Party quit the ruling coalition, leaving the Liberal Democratic Party to try and establish a new coalition. The trade tensions pressured Chinese markets, with the Shanghai Composite dropping 1.5% while the Hang Seng was down almost 4%. Precious metals were the best gainers of the week, with gold up 5.9% and silver rising 6.6% with investors seeking out the ‘safe-havens’. Gold had reached a record high of above $4,300 per ounce.