Markets have traded cautiously this week, with performance remaining fairly mixed as investors weigh shifting economic signals.
Over in China, Xi Jinping chaired a meeting of the Communist Party of China this week to assess the region’s current economic conditions and near-term growth outlook. Policymakers said the economy has performed strongly so far this year, exceeding expectations. However, they made clear there is no room for complacency, highlighting ongoing geopolitical risks (including tensions linked to Iran) as potential headwinds. The leadership reiterated its focus on strengthening technological self-reliance, with an emphasis on developing and governing AI as part of that strategy. At the same time, they stressed the importance of maintaining a robust manufacturing base. To support growth, policymakers also signalled continued investment in major infrastructure projects, including energy grids, transport networks, and digital systems.
This week, the European Union launched its “One Europe, One Market” initiative, an ambitious effort to complete and deepen the single market by 2027. Rising global competition and persistent fragmentation have driven the creation of a new 42-pillar plan aimed at cutting regulatory red tape, removing key barriers to cross-border business, and improving digital efficiency. While member states will face increased pressure to align with the new rules, quarterly meetings will be held to monitor progress and ensure implementation.
While no progress has been made toward ending the conflict in the Middle East, Donald Trump stated this week that Iran is nearing economic collapse and is seeking a swift removal of the blockade in the Strait. The accuracy of this claim remains uncertain. Trump is reportedly considering maintaining a prolonged blockade to increase pressure on Iran, as storage capacity tightens and Brent crude oil prices have risen above $110 per barrel in response.
This week, traders expect the Bank of England, ECB and Federal Reserve to keep interest rates unchanged at their upcoming monetary policy meetings this week. Policymakers are widely seen as adopting a “wait-and-see” approach, as they assess how the ongoing conflict in Iran is feeding through to inflation – particularly via higher energy prices. We also have big tech earnings from Meta, Alphabet, Microsoft and Amazon tomorrow.
Nicola Tune, Portfolio Specialist
