Weekly Market Review - 05 May 2026

Global equities delivered mixed returns in what was a busy week for news headlines. US equities led returns, as investors digested conflicting headlines in the Middle East, rallying energy prices, a raft of central bank decisions and a flurry of corporate earnings results. Japanese equities lagged following a strong start to 2026.

US: Equities rally on robust corporate earnings, while interest rates remain on hold

US equities delivered solid gains for the week, largely shrugging off geopolitical concerns in the Middle East and a more hawkish than expected Federal Reserve meeting. Large cap stocks outperformed, with value beating growth as higher oil prices boosted the energy sector, helping the S&P 500 post its strongest monthly return since November 2020. Corporate earnings were generally robust, offsetting concerns around rising input and energy costs. Several of the Magnificent Seven stocks reported results, with Alphabet (Google) climbing on strong AI demand while Meta fell after signalling higher investment spending. The Federal Reserve kept rates on hold, but an unusually high number of dissents was taken as a hawkish signal by markets. Three members dissented from the decision to incorporate the easing language and one dissented in favour of cutting interest rates. This was the largest number of dissents during Powell's time as Fed chair. 

Japan: Japanese yen rallies on suspected official currency intervention

Japanese equity markets were mixed, with the Nikkei slightly lower while the broader TOPIX edged higher. Currency movements dominated headlines as the yen strengthened sharply, widely seen as the result of official intervention. The Bank of Japan held rates steady but delivered a hawkish message, with a split vote highlighting growing support for further tightening. Inflation forecasts were revised higher, while growth expectations were lowered, underscoring the difficult policy trade off facing the central bank.

China: Moody’s hike China’s sovereign outlook to stable  

Mainland Chinese equities ended the holiday shortened week higher, supported by Moody’s upgrade of China’s sovereign outlook to stable. Authorities signalled continued targeted policy support, stopping short of broad-based stimulus while focusing on domestic demand and strategic industries. Industrial profits rose strongly, led by high tech and equipment manufacturing sectors, reinforcing signs of a production and export driven recovery. Gains remained uneven across the economy, with some sectors pressured by rising raw material costs. Overall sentiment was steady, with confidence supported by signs of macro resilience.

Europe: European Central Bank keeps rates on hold

European equity markets were broadly flat as positive earnings momentum was offset by elevated oil prices and continued Middle East uncertainty. Germany’s DAX added 0.68%, and Italy’s FTSE MIB rose 1.24%. France’s CAC 40 Index declined 0.53%. The European Central Bank held rates steady but acknowledged that risks to the eurozone economy had intensified, with discussions around potential future tightening. Economic sentiment across the euro area weakened further, falling to its lowest level since 2020. German inflation ticked higher, largely driven by energy prices. In Spain, unemployment rose more than expected, highlighting uneven economic conditions across the region.

UK: Bank of England holds interest rates at 3.75%

The UK market was broadly unchanged over the week, with investors remaining cautious amid rising inflation and uncertain energy prices. The Bank of England kept the base rate on hold, reiterating that it stands ready to act if inflation pressures persist. They acknowledged that inflation has moved higher, adding to concerns around the outlook for household finances. Consumer sentiment weakened further, with retail sales confidence falling to its lowest level on record. Overall, economic data continues to point to a challenging backdrop for growth.

What's Important Next: 05 May to 8 May 2026

1. Reserve Bank of Australia meeting (Tuesday)

RBA has been hiking rates, now at 4.10%. Given elevated energy prices from the Middle East conflict, another hike is possible. Markets will watch for signals on how aggressively they're responding to inflation. Any hawkish tone moves the Australian dollar and has read-across for other central banks facing similar pressures.

2. US Non-Farm Payrolls (Friday)

The April jobs report. Always a market mover, but particularly important now given the Fed's hawkish tone last week and Trump's pressure on incoming Fed Governor Kevin Walsh to cut rates. A strong number makes cuts harder to justify. A weak number raises recession concerns. Either way, volatility.

Issued by Omnis Investments Limited. This update reflects Omnis’ view at the time of writing and is subject to change. The document is for informational purposes only and is not investment advice. We recommend you discuss any investment decisions with your financial adviser. Omnis is unable to provide investment advice. Every effort is made to ensure the accuracy of the information, but no assurance or warranties are given. Past performance should not be considered as a guide to future performance.