Global markets ended the week on a stronger footing as investor sentiment improved across several major economies, supported by easing geopolitical concerns and renewed optimism surrounding artificial intelligence-related sectors.
While inflation, energy prices, and slowing consumer confidence continued to create uncertainty, equity markets in the U.S. and Europe largely moved higher.
Meanwhile, Asia presented a mixed picture, with Japan benefiting from strong technology momentum while China faced renewed concerns around slowing economic activity.
United States Market
U.S. markets delivered another positive week, with the Dow Jones Industrial Average reaching a new all-time high while the S&P 500 extended its winning streak to eight consecutive weeks.
Investor confidence was supported by strong earnings from AI-related companies, particularly within the semiconductor sector, helping offset uncertainty linked to ongoing geopolitical tensions in the Middle East.
Small-cap and value stocks also outperformed, reflecting broader market participation beyond major technology names.
Economic data painted a mixed picture for the U.S. economy. Manufacturing activity strengthened notably in May, reaching its highest level in four years, while the services sector showed signs of slowing. Inflation pressures remained a key concern, however, as businesses reported rising input costs and higher selling prices. Employment trends also softened, with companies citing rising operational costs and weaker demand conditions.
Consumer confidence weakened significantly during the month. The University of Michigan’s consumer sentiment index fell to a record low, largely driven by concerns around rising living costs and persistent inflation. Inflation expectations also continued to increase, highlighting concerns that elevated prices may remain a challenge for households and businesses in the coming months.
The housing sector remained under pressure due to higher borrowing costs. Mortgage rates climbed to their highest level since August, while housing starts declined and homebuilder confidence remained subdued. Despite these challenges, U.S. Treasury markets stabilized toward the end of the week as investors reacted positively to reports suggesting progress in diplomatic talks between the U.S. and Iran.
Europe Market
European markets moved higher during the week, supported by hopes of reduced geopolitical tensions and improving investor sentiment globally. The STOXX Europe 600 Index gained 3%, with Germany, France, Italy, and the UK all recording positive weekly performances. Investor optimism was also helped by stronger appetite for risk assets following stabilizing energy prices and easing fears of further escalation in the Middle East.
Despite stronger equity market performance, the economic outlook for Europe became more cautious. The European Commission lowered its growth forecast for the eurozone in 2026, citing ongoing energy-related
challenges and an increasingly uncertain geopolitical and trade environment. At the same time, inflation expectations were revised higher, reflecting the continued impact of elevated energy and commodity prices across the region.
Germany’s producer prices rose at their fastest pace in nearly a year, driven mainly by higher mineral oil and industrial goods prices. Machinery and capital goods also experienced price increases, suggesting continued cost pressures across manufacturing industries. Meanwhile, the eurozone’s trade surplus narrowed sharply as exports weakened, particularly shipments to the United States following the introduction of U.S. tariffs earlier in 2025. Industries such as chemicals, machinery, vehicles, and food products experienced some of the largest declines in exports.
In the United Kingdom, labour market conditions weakened modestly, with unemployment rising and job vacancies falling to their lowest level in five years. However, inflation data came in lower than expected, helped by government energy price measures that limited increases in household utility costs. This provided some relief to consumers and businesses facing broader economic uncertainty.
Asia and Global Markets
Asian markets showed mixed performance during the week. Japan’s equity markets rebounded strongly, supported by improving investor sentiment, stable oil prices, and renewed enthusiasm around AI and semiconductor-related companies. The Nikkei 225 Index rose over 3%, with technology stocks leading gains as global investors continued rotating into AI-driven sectors.
Japan’s economic data also surprised positively. First-quarter GDP growth exceeded expectations, supported by stronger consumer spending and export activity. However, inflation slowed further below the Bank of Japan’s target, reducing immediate pressure for aggressive interest rate increases. At the same time, Japanese government bond yields remained elevated due to ongoing concerns surrounding fiscal spending and longer-term inflation risks.
In contrast, Chinese markets ended the week lower as disappointing economic data renewed concerns around slowing growth. Retail sales, industrial production, and fixed asset investment all weakened compared with previous months, highlighting ongoing pressure within the property sector and broader domestic demand. Investors increasingly expect additional targeted stimulus measures from Beijing to support economic activity.
China’s central bank kept key lending rates unchanged for the twelfth consecutive month, signaling a preference for targeted support measures rather than broad monetary easing. Meanwhile, geopolitical developments remained closely monitored after China and Russia signed multiple agreements covering energy, trade, and technology cooperation, reinforcing long-term strategic alignment between the two countries.
Looking ahead
As global markets continue to navigate inflation pressures, geopolitical developments, and shifting monetary policy expectations, investors remain focused on resilience, innovation, and long-term growth opportunities across major economies.
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