Tech stocks, particularly those tied to AI, were responsible for much of the week’s movements. Amongst notable AI stock movers was Nvidia, which benefitted from news that the US had cleared its H200 chips to be sold to China, while Cisco touched a record high after raising its annual revenue forecast. On Thursday, both the S&P 500 and Nasdaq Composite closed at all-time highs while the Dow Jones Industrial Average was just 0.3% away from its record.
However, the week ended on a downbeat note, with the major indices all down over 1% on Friday, and chip stocks among the hardest hit. Part of that may have been attributed to a degree of profit taking, while another culprit was the risk-off mood fuelled by hotter-than-expected inflation prints. Overall, the S&P 500 managed to add a modest 0.1%, its seventh consecutive weekly gain. The energy sector outperformed, with oil prices higher. In contrast, Friday’s losses pushed both the Dow and Nasdaq to weekly losses of 0.2% and 0.1% respectively. Meanwhile Treasury yields picked up over the week on the inflation fears. On Friday the 10-year Treasury hit its highest level since February 2025, while the 30-year yield saw its highest close since July 2007.
High stakes talks between Presidents Trump and Xi drew focus but yielded little tangible progress, albeit there was likely a degree of relief that the relationship between the pair did not sour. With little progress in negotiations in the Middle East and the Strait of Hormuz remaining closed, the prospect of higher inflation and indeed higher interest rates also weighed on European markets. Similar to the US, the region had experienced positive momentum from tech shares as well as general buoyancy around the earnings season, before a pullback on geopolitical risk. For the week the pan-European STOXX 600 lost 0.9%, with materials and defence sectors among the biggest laggards. In addition, there was political uncertainty in the UK, with mounting pressure on Prime Minister Keir Starmer’s leadership. In response, gilts sold off, with the yield on the 30-year gilt reaching its highest level since 1998, while the pound weakened.
Japanese government bond yields also jumped, with the 10-year JGB reaching its highest level since 1997. This was driven by rising expectations that the Bank of Japan would hike interest rates, with a rise in wholesale inflation in April. Stock market performance in Japan was mixed with the broader Topix up 0.9% while in contrast the Nikkei 225 dropped 2.1%. In South Korea, early on Friday the Kospi managed to top the 8,000 level for the first time, with recent gains being fuelled by AI optimism, before tumbling over 7% for the session, putting it at a marginal loss for the week. Chinese indices also declined for the week, although they were supported by signs of stabilisation in US-China relations.