Earnings reports from major Chinese concept stocks are set to be released, while the potential outcome of U.S.-Iran peace negotiations remains a key watchpoint.
Last week saw significant shifts in international markets, with U.S. semiconductor and chip stocks posting strong gains, and hopes rising for progress in U.S.-Iran talks.
Regarding market performance, U.S. stocks closed higher across the board. The Dow Jones Industrial Average rose 0.22% for the week, the Nasdaq Composite gained 4.51%, and the S&P 500 increased by 2.33%. European major indices were mixed: the UK's FTSE 100 fell 1.26%, Germany's DAX 30 rose 0.19%, and France's CAC 40 ended the week flat.
The upcoming week holds several important events. U.S. inflation data will be a focal point, allowing investors to assess the interest rate outlook for the coming months. The Eurozone will also release inflation and Gross Domestic Product (GDP) figures. In Asia, markets will focus on statements from the Bank of Japan for clues about its monetary policy direction.
U.S. Inflation Pressure Under Scrutiny
April's U.S. non-farm payrolls exceeded expectations, indicating economic resilience and potentially fueling concerns about demand-pull inflation. Nick Rees, Head of Macro Research at financial services group Monex, stated, "For the incoming Fed Chair Wash, the jobs data essentially rules out a near-term rate cut."
On May 12, the U.S. will release the April Consumer Price Index (CPI). The market will evaluate the pass-through effect of rising energy costs, driven by Middle East conflicts pushing up gasoline prices, on overall inflation and the potential for future Federal Reserve rate cuts. The Producer Price Index (PPI) for April, released the following day, is also crucial, reflecting upstream inflationary pressures. Data from the London Stock Exchange Group (LSEG) shows market pricing indicates only a 16% probability of a 25 basis point rate cut before September.
Other notable indicators to watch include April existing home sales data on May 11, April retail sales and weekly initial jobless claims on May 14, and April industrial production on May 15.
As the earnings season draws to a close, key companies reporting include Cisco, Applied Materials, and Constellation Energy. Chinese concept stocks Alibaba, JD.com, and NetEase are also scheduled to announce their results.
Crude Oil and Gold
International oil prices fell sharply last week, influenced by news related to progress in U.S.-Iran talks. The front-month WTI crude contract dropped 6.40% for the week to $95.42 per barrel, while the front-month Brent crude contract declined 6.36% to $101.29 per barrel.
Reports indicate that the two sides, through mediators, are drafting a memorandum of understanding to restart negotiations, with related talks potentially opening next week in Pakistan. Traders are awaiting the latest developments. If an agreement cannot be reached in the short term, market concerns about a sustained crude supply disruption in the Middle East could reignite.
Analysts believe the crude oil market will remain highly driven by geopolitical headlines. Recent escalations have further supported geopolitical risk premiums. The resumption of normal crude shipments through the Strait of Hormuz is unlikely in the short term, posing a risk of further oil price increases. Analysts at Commerzbank noted that the three major energy agencies—the Organization of the Petroleum Exporting Countries (OPEC), the U.S. Energy Information Administration (EIA), and the International Energy Agency (IEA)—are set to release their latest monthly reports soon. These may provide in-depth analysis of changes in crude market fundamentals and revise supply and demand forecasts. The IEA previously judged in April that supply disruptions would be limited to the second quarter, thus keeping its second-half supply and demand forecasts largely unchanged. However, the longer shipping through the Strait of Hormuz remains restricted, the more persistent its impact on oil prices will be.
Precious metals stabilized and rebounded. The COMEX gold futures contract for May delivery rose 1.95% for the week to $4,720.40 per ounce. COMEX silver futures gained 5.85% for the week to $80.39 per ounce.
Since the outbreak of the current Middle East conflict in late February, gold has fallen over 10%. Earlier, surging oil prices heightened inflation concerns and suppressed rate cut expectations, keeping pressure on gold prices. Recent market optimism about a potential U.S.-Iran peace deal has alleviated investor worries about "persistent inflation leading to prolonged high interest rates."
The latest report from the UBS Global Wealth Management Chief Investment Office indicates that while gold prices remain well below January highs, strong demand from institutional and retail investors suggests further upside potential. The bank still views gold as an effective portfolio diversifier and store of value, forecasting a year-end price of $5,900 per ounce.
European Economy Faces Tests
Driven by higher fuel prices due to the Iran situation, Eurozone retail sales volume dipped slightly by 0.1% in March. The data does not yet fully reflect the total impact of the energy price shock; overall retail demand is expected to weaken further in the coming months. The European Central Bank views household consumption demand as a core pillar of economic growth and has stated that containing second-round effects from rising energy prices remains a top priority. Vera Jotanovic, Chief Economist at the European Retail and Wholesale Association, noted that chain effects may gradually emerge in the coming months: rising energy costs pass through to business operating expenses, and fertilizer shortages push up food prices. "Our biggest concern is the convergence of multiple shocks: energy, food, and overall inflationary pressures hitting simultaneously."
Expectations of further squeezed disposable income for European households in the coming months could significantly drag on retail demand. Eurozone consumer confidence has plummeted in recent months, falling in April to its lowest level since December 2022. Riccardo Fabiani, Senior Economist at Oxford Economics, stated that consumer confidence tends to react quickly to various shocks, but adjustments in consumer spending are more lagged. "What's truly worth watching is the trend over the next few months. The outlook for the next three to six months is not optimistic following this shock."
Last week, French Central Bank Governor François Villeroy de Galhau stated that the European Central Bank cannot commit to raising its key rate at the June meeting, and subsequent policy decisions will be entirely data-dependent based on actual economic developments. The ECB kept its benchmark rate unchanged last week, but investors interpreted signals from the subsequent press conference as suggesting a high likelihood of a rate hike at the next policy meeting.
Data-wise, investors can focus on Germany's final April CPI, the Eurozone and Germany's May ZEW Economic Sentiment Index, and Italy's March industrial production on May 12. May 13 will see the release of France's final April CPI, Eurozone March industrial production, the second estimate of Q1 GDP, and preliminary Q1 employment figures.
In recent local elections, UK Prime Minister Keir Starmer's Labour Party suffered significant losses. If Starmer can navigate internal challenges, the King's Speech on May 13 could become a policy window for him to boost support.
Sandra Horsfield, Economist at asset management group Investec, said, "The core market concern is whether Starmer's position will be weakened, paving the way for a more left-wing Labour leader. If markets worry that fiscal spending is exceeding controllable limits, it could impact government bonds and the pound, although the latter has shown relative resilience recently."
Key Events for the Coming Week
Comments