Weekly Capital Market Watch

US equities rallied on strong earnings, with nearly 85% of S&P 500 companies beating consensus estimates. Information technology outperformed, supported by continued AI-related demand, while energy and utilities lagged. Labor market data remained broadly resilient: April nonfarm payrolls rose by 115k versus expectations of 62k, while March payrolls were revised higher to 185k. The unemployment rate held at 4.3%, although labor force participation fell to its lowest level since October 2021. Construction spending and factory orders also exceeded expectations, supported by strong demand for electronics and AI infrastructure. However, consumer sentiment deteriorated sharply, with the University of Michigan index falling to a record low of 48.2 amid concerns over gasoline prices and tariffs.

Recent economic data reinforced expectations that the Federal Reserve will remain cautious on rate cuts. While payroll growth, factory orders, and construction activity indicated continued economic resilience, productivity growth slowed to an annualized 0.8% in Q1 2025 from 1.6% in Q4 2024, and sentiment indicators weakened significantly.

European equities ended the week modestly higher despite elevated volatility. Sentiment was initially supported by easing Middle East tensions and solid earnings, though renewed US tariff threats toward the EU weighed on markets later in the week. Germany’s DAX rose 0.2%, while Italy’s FTSE MIB gained 2.2%.