Weekly Capital Market Watch

US equities rallied strongly, with the S&P 500 rising 4.5% to 7,126 and the Nasdaq Composite up 6.8%, reaching record highs. Gains were driven by easing Middle East tensions, including a temporary ceasefire and signals that the Strait of Hormuz may reopen, which pushed oil prices lower. AI-related stocks continued to outperform, supported by strong investor inflows. Economic data was mixed but supportive: producer prices rose below expectations (PPI +0.5% m/m; core +0.1%), while jobless claims remained low at 207k. Manufacturing activity improved, with the Philadelphia Fed index rising to 26.7.

The softer inflation data reinforced expectations that the Federal Reserve can remain patient on rates. Cooling wholesale inflation, stable labor market conditions, and mixed housing data (existing home sales -3.6% m/m; weak builder sentiment) suggest no urgency to tighten policy further. Treasury yields declined slightly to ~4.24%, reflecting improved risk sentiment and lower geopolitical risk. Credit markets also strengthened, with high-yield bonds outperforming amid strong demand and active issuance.

European equities followed the positive global trend, with the STOXX Europe 600 up 1.9%. Major indices gained, including Germany’s DAX (+3.8%), France’s CAC 40 (+2.0%), and Italy’s FTSE MIB (+2.7%), while the UK lagged slightly (+0.6%). Sentiment improved on easing geopolitical risks and stable earnings, with energy markets benefiting from lower oil price volatility linked to developments around Iran and the Strait of Hormuz.