Global markets enjoyed a positive start to the week as easing energy prices and continued optimism surrounding artificial intelligence (‘AI’) supported investor sentiment, while attention remained focused on monetary policy, geopolitical developments and political events across Europe.
Investor sentiment remained buoyant on Monday following the Independence Day holiday, helping US equity markets begin the week on a positive note. Big tech stocks, particularly those linked to AI, led the advance, with the Nasdaq rising 1.12% and the S&P 500 gaining 0.72% in dollar terms. The positive mood was further supported by a retreat in crude oil prices, which helped ease concerns over inflationary pressures and the potential impact of higher energy costs on economic growth. Enthusiasm was also aided by news that SpaceX had been added to the Nasdaq-100, reinforcing optimism around the technology and innovation sectors.
In the Eurozone, retail sales rose by 1.6% year-on-year in May, accelerating from the 0.9% increase recorded in April. Europe has been more exposed to higher energy prices than other regions, as a number of countries remain reliant on energy flows through the Strait of Hormuz, which continues to face disruption. Despite these pressures, there has been only moderate evidence that consumers have become more cautious with their spending. This is notable given that real income declined during the second quarter, something that would typically be expected to weigh on household consumption. Attention is now turning to the European Central Bank’s next monetary policy meeting in July. At its most recent meeting, the ECB raised interest rates by 25 basis points. However, a further increase is far from certain, as any renewed rise in inflation would likely reflect higher energy prices rather than excessive consumer demand or broader overheating in the economy.
Meanwhile in China, reports suggest that AI start-up DeepSeek is developing its own artificial intelligence chip, which if successful, would mark an important step in the company’s efforts to reduce its reliance on chips supplied by industry leader Nvidia. Developing proprietary hardware could not only strengthen DeepSeek’s competitive position but also provide greater control over its AI infrastructure, particularly as access to advanced semiconductors remains constrained by geopolitical tensions and export restrictions.
On Tuesday, the French Court of Appeal upheld Marine Le Pen’s conviction for the misuse of European Union funds but significantly reduced the length of her ban from holding public office. The ruling means that Le Pen is now eligible to stand in France’s 2027 presidential election, reviving uncertainty over the country’s political outlook ahead of the vote. Financial markets showed only a muted reaction to the decision, with French equities and government bond markets remaining broadly stable.
Still to come this week, we have the Fed’s meeting minutes, China’s inflation rate and their PPI data.
Nicola Tune, Portfolio Specialist