Mixed sentiment

The week kicks off on a mixed note. Last week’s Federal Reserve (Fed) rate cut gave markets a boost, but news that the Bank of Japan (BoJ) will begin reducing its ETF holdings unsettled global risk sentiment on Friday. The Nikkei came under notable selling pressure, the Stoxx 600 and FTSE 100 traded slightly bearish, but Wall Street shrugged it off: the S&P 500 and Nasdaq both advanced to fresh record highs as the US 2-year yield consolidated just below 3.60% and the 10-year rose to 4.41%.

On the geopolitical front, Trump and Xi reportedly held a constructive call. Details remain scarce, but progress was reported on TikTok, and the two leaders will revisit trade and tariffs in the coming weeks. Meanwhile, Australia, Canada and UK recognized the state of Palestine that could revive geopolitical tensions as the move didn’t please Israel and the US...

On the monetary policy front, the People’s Bank of China (PBoC) left its key rate unchanged at record lows for the fourth consecutive month, aiming to cushion the impact of US tariffs. But Chinese equities opened the week on a muted note, as investors were left wanting more clarity on trade from the Xi-Trump dialogue. By contrast, the Nikkei is better bid thanks to a softer yen, Asian gauges are broadly firmer, while Indian tech stocks face pressure after Trump proposed raising H-1B visa fees to $100,000 up from a few thousand dollars. The steep increase would make hiring foreign talent far more expensive; an analyst at Jefferies estimates this could raise corporate costs by 4–13%, weighing on jobs and growth in the near term, while potentially accelerating AI adoption longer term.

On the goods side, a North American freight index shows shipments have steadily declined this year, falling to their lowest levels since the pandemic. Yet weaker imports haven’t yet fueled consumer price pressures, and US growth likely improved last quarter after a sharp hit in Q1. This Thursday’s US Q2 GDP update is expected to show 3.3% growth with inflation near 2%, while Friday’s core PCE print is also unlikely to suggest building pressures.

Several Fed officials are scheduled to speak this week following last week’s decision to cut rates. They are expected to stress the need to support a weakening labour market as long as inflation remains under control. For now, equity bulls see little to fear: lower rates, an improving earnings outlook, dollar softness boosting overseas revenues and the AI theme remain supportive. Oracle jumped 4% Friday on reports it is in talks with Meta on a ~$20bn cloud deal, while Samsung rose 4% in Korea after winning Nvidia approval to supply high-bandwidth memory chips.

In FX, the dollar is broadly firmer since the FOMC, which proved less dovish than markets hoped. The EURUSD looks toppish, with scope for a retreat toward the 50- and 100-DMA levels. Cable has already slipped below its 100-DMA and is testing 50-DMA support. Dollar strength looks set to keep both pairs under pressure in the near term.

In commodities, gold opened the week higher on renewed Middle East tensions, while silver hit its highest level since 2011. Oil gained as Europe considers tightening sanctions against Russia after fresh airspace violations over NATO countries. European defense and aerospace names remain well bid.

But the standout move was in uranium: the Global X Uranium ETF surged 8% Friday to its highest since 2011 after Trump signed executive orders to quadruple U.S. nuclear power capacity by 2050 and unveiled a cross-Atlantic Technology Prosperity Deal with the UK. The news underscores nuclear’s growing role alongside clean energy, as data-center demand from AI surges. While clean energy ETFs lagged Friday, nuclear’s revival doesn’t necessarily derail the broader green transition — both sources are needed to meet intensifying power needs.

Week ahead: This week brings flash PMIs for a global read on activity, US growth and inflation data, and the Swiss National Bank’s (SNB) policy meeting on Thursday, where rates are expected to remain unchanged.