Strong May performance overshadows trade jitters

General market commentary

Equity markets ended Friday’s session mixed, concluding a strong month for U.S. shares. The Dow Jones Industrial Average closed slightly higher, the S&P 500 finished flat, and the Nasdaq Composite slipped by around a third of a percent. Despite the muted end to the week, both the S&P 500 and Nasdaq recorded their largest monthly gains since November 2023. Strong corporate earnings, particularly in the technology sector, and continued momentum in artificial intelligence investment were key drivers of market performance throughout May.

Friday’s trading was dominated by renewed trade policy uncertainty. Equities opened lower following comments from former President Donald Trump suggesting a tougher stance on China, but markets rebounded somewhat after he indicated plans to speak with President Xi Jinping. While tariff-related headlines continued to generate volatility, investors appeared increasingly focused on fundamentals. Solid earnings growth, especially among large-cap technology firms, helped to offset concerns around global trade tensions, keeping overall sentiment relatively constructive heading into June.

Latest market and economic update

Most Asian markets fell on Monday amid escalating US-China trade tensions, renewed tariff fears, and geopolitical concerns surrounding Russia and Ukraine. Hong Kong’s Hang Seng led losses with a 2.3% drop, while Japan’s Nikkei slipped 1.5%; South Korea’s KOSPI bucked the trend, rising 0.2% ahead of Tuesday’s presidential election.

US equity futures edged lower overnight as investors awaited new catalysts following a strong May, during which the S&P 500 surged 6.15%, its best monthly showing since November 2023. Despite lingering trade uncertainties and legal back-and-forth over tariffs, sentiment remains supported by robust economic data and upbeat corporate earnings.

European markets ended flat on Friday, but both the STOXX 50 and STOXX 600 gained over 3.5% in May, their best monthly showing since January, driven by strength in oil & gas, healthcare, and utilities. Easing inflation in major Eurozone economies boosted hopes of an ECB rate cut, while SAP, Siemens, and L'Oréal led gains and Sanofi lagged with a 4.4% drop.

The US dollar index fell toward 99 this morning, erasing last week’s gains amid renewed trade tensions and escalating friction with China. With the euro strengthening, EUR/USD is currently trading at 1.1356, reflecting broader investor caution ahead of key US economic data later this week.

Oil prices jumped in Asian trade on Monday as heightened Russia-Ukraine tensions and the prospect of fresh U.S. sanctions on Moscow outweighed a widely expected OPEC+ output hike. Brent rose 2.3% and WTI 2.4%, as markets reacted to fears of tighter global supply, particularly if top Russian oil buyers China and India face new U.S. trade penalties.

China’s Commerce Ministry firmly rejected President Trump’s accusations that it violated the recent Geneva trade agreement, calling the claims unfounded and contrary to the facts. Despite both sides agreeing to lower tariffs under the deal, tensions persist over issues like U.S. chip export controls, with talks now stalled and no clear path to renewed dialogue.

China’s NBS Composite PMI rose slightly to 50.4 in May, as a milder contraction in manufacturing offset continued weakness in services, with overall activity expanding modestly. Despite support from a recent US-China trade truce and domestic stimulus efforts, both sectors remain under pressure from weak demand and lingering global headwinds.

President Trump announced US steel and aluminium tariffs will double to 50% from Wednesday, claiming the move will boost the domestic industry and protect jobs. While he highlighted a $14 billion deal with Japan’s Nippon Steel, concerns remain over union contracts and potential EU retaliation.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Palantir Technologies has significantly expanded its role in the Trump administration’s efforts to enhance inter-agency data sharing, with its Foundry product now used by multiple federal agencies to consolidate and analyse government data. This increased involvement supports the administration’s goal of eliminating information silos and improving government efficiency, though it has raised ongoing privacy concerns.

AstraZeneca’s camizestrant cut the risk of disease progression in breast cancer by using a blood test to detect early resistance, while its immunotherapy Imfinzi reduced recurrence in early stomach and oesophageal cancers by 29%. Meanwhile, Gilead’s Trodelvy combined with Merck’s Keytruda lowered progression risk in advanced triple-negative breast cancer by 35%, offering a new targeted frontline treatment for PD-L1 positive patients.

German chemicals maker BASF is exploring the sale of its coatings business, valued at around €6 billion, with private equity firms like Advent, Bain Capital, Blackstone, and Platinum Equity showing interest. This move follows BASF’s plan to make its agriculture, battery materials, and coatings divisions more autonomous to boost earnings.

HSBC is exiting its US business banking portfolio as part of a strategy to simplify operations and focus on Asia and the Middle East, affecting around 4,500 clients. The bank will support clients in transitioning to alternative providers while retaining some in its Mid-Market and Global Network Banking divisions.

Amazon Web Services (AWS) is expanding data centres globally, adding sites in Chile, New Zealand, Saudi Arabia, and Taiwan, while increasing access to Nvidia’s latest AI chips. CEO Matt Garman highlighted AI services’ potential to generate billions annually and showed interest in hosting OpenAI’s models, now on Microsoft servers.

Regeneron shares fell nearly 18% on Friday, after its experimental COPD drug, itepekimab, failed a late-stage trial despite success in another, delaying its market launch by 2-3 years. The drug, seen as a growth driver beyond Regeneron and Sanofi’s Dupixent, faced mixed results and calls for more studies, denting investor confidence.

UBS Global Research is positive on SAP, citing its AI-driven strategy as boosting cross-selling across cloud applications, with plans to expand AI use cases by year-end. Despite near-term headwinds, UBS raised its 12-month price target to €307, confident in SAP’s long-term growth and margin improvement.

Truist Securities downgraded Airbnb to Sell, citing weaker-than-expected summer leisure demand in the US and Europe alongside valuation concerns. The brokerage also lowered its price target and warned that softer booking trends and reduced tourism, especially in Hawaii, are pressuring the broader lodging sector.

Bank of America reiterated its Buy rating on Netflix, raising the price target to $1,490, citing the company’s strong subscriber growth, expanding advertising efforts, and live content strategies. The bank highlighted Netflix’s growing ad-supported user base, a robust content pipeline for 2025, and popular returning shows as key drivers for continued outperformance.

Upcoming data and events

Markets face a potentially volatile week as renewed US-China trade tensions resurface, with investor attention turning to key US data including the labour market report, ISM PMIs, and speeches from Fed officials. Elsewhere, rate decisions from the ECB, BoC, and RBI, alongside inflation, GDP, trade, and PMI figures from major economies, will offer crucial insights into the health of the world economy.

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