Update Equities: Tariff uncertainty persists
The equity markets experienced volatility driven by persistent trade tensions, as US President Donald Trump announced that unilateral tariff rates would be set within two weeks, impacting global trade dynamics.
Equity index futures came under pressure, among other things exacerbated by concerns over the European Union potentially being among the last to secure a trade deal.
Despite the latest tariff threats emerging shortly after positive talks between Chinese and US officials, Trump's comments are perceived by some investors as a strategic move to expedite trade negotiations. Stocks have been resilient, recovering from April lows following Trump's announcement of the highest US levies in a century that were aimed at reshaping global trade.
From a sector perspective, energy stood out as the top performing sector this week, driven by a surge in oil prices amid escalating US-Iran tensions. Israel’s strikes on Iran’s nuclear facilities, on Friday morning, led to a further spike in oil prices. Conversely, the consumer staples sector underperformed. Big Tech stocks experienced a downturn, following a rally that propelled the S&P 500 Index close to its all-time high.
Gains in US stocks were fuelled by unexpectedly benign inflation data, which stoked bets on Federal Reserve rate cuts. US core inflation rose in May by less than anticipated, indicating that companies are so far largely refraining from passing higher tariff costs on to consumers. Despite losses on Wednesday, the S&P 500 Index has seen a remarkable rally from the brink of a bear market in April. Meanwhile, European stocks were flat, while emerging-markets indices advanced.
On a single stock basis, Nvidia made headlines as CEO Jensen Huang projected a tenfold increase in Europe's artificial intelligence (AI) computing capacity over the next two years, with plans for over 20 AI factories underway. Nvidia is collaborating with Mistral AI to establish an AI cloud utilizing 18,000 new Grace Blackwell chips and is partnering with various companies and countries for national-level AI technology deployment. This development underscores Nvidia's strategic initiatives to expand its footprint in the AI sector and drive technological advancements across Europe.