Weekly Market Recap & What's Ahead

12 May 2025 (recap 5 to 9 May 2025)

Key Takeaways

• Global equities mixed; US-China trade optimism lifted sentiment late in the week.
• Volatility initially elevated on tariff uncertainty, but eased as trade talks progressed.
• Bitcoin approached record highs near $104K; Ethereum rallied post-upgrade.
• US Treasury yields rose broadly, reflecting strong risk sentiment.
• Commodities buoyed by easing trade tensions; gold retreated sharply late in the week.
• USD firmed amid strong risk appetite and positive trade developments.

Market Recap

Headlines & Introduction

Markets saw considerable fluctuations throughout the week, driven by trade tensions, central bank decisions, and key corporate earnings releases. Early-week volatility eased substantially following positive developments from trade discussions between the US and major trading partners, notably the UK and China. Investor focus increasingly shifted towards upcoming economic indicators and central bank guidance, shaping expectations for the weeks ahead.

Equities

• US stocks experienced significant volatility, influenced by tariff concerns and Federal Reserve policy updates. The week started on a bearish note with the S&P 500 down 0.64% (May 5), driven by tariff tensions and uncertainty ahead of Fed decisions. Markets rebounded mid-week as the Fed held rates steady, and optimism grew around a US-UK trade framework, driving the S&P up by 0.4% (May 7) and further 0.58% (May 8). Standout moves included Disney’s surge of +10.8% following strong earnings on May 7, Alphabet’s sharp decline of -7.5% the same day on competition concerns, and Tesla's significant recovery (+3.1%) by May 9.
• European equities saw a cautious beginning but strengthened later in the week. Germany's DAX index notably rose by 1.02% on May 9, driven by Rheinmetall and BMW despite reporting mixed earnings results. The UK’s FTSE 100 ended a record-breaking rally, slightly declining by 0.32% on May 8, impacted by cautious guidance from the Bank of England and profit-taking in major pharma companies.
• Asian markets performed broadly positively throughout the week, driven primarily by increased optimism surrounding US-China trade negotiations. Key benchmarks such as Hong Kong’s Hang Seng and Japan’s Nikkei registered notable gains, though persistent geopolitical tensions between India and Pakistan moderated overall regional sentiment.

Volatility

Volatility spiked early in the week, with the VIX reaching a peak of 24.76 on May 6, fueled by tariff uncertainty and Fed policy speculation. However, volatility declined markedly later, with the VIX dropping to 22.48 by May 9 as US-China trade optimism helped alleviate market anxiety. Investors remain cautiously positioned, anticipating key economic releases and major corporate earnings announcements.

Digital Assets

Bitcoin hovered near record highs around $104,000 by the end of the week, supported by a positive risk-on mood related to ongoing trade discussions. Ethereum saw significant upward momentum, reaching $2,243 after a successful network upgrade that boosted trader interest and open interest. Crypto-related stocks performed exceptionally well, with Marathon Digital Holdings (MARA) jumping 10.29% and Riot Platforms (RIOT) rising 7.65%.

Fixed Income

US Treasury yields increased notably across the yield curve, driven by improved risk sentiment and positive trade developments. The benchmark 10-year yield closed near 4.4% on May 9 after a notably weak 30-year Treasury bond auction. Credit spreads tightened sharply during the week, signaling easing market concerns about tariffs and improving investor confidence.

Commodities

Commodity markets benefited broadly from reduced trade tensions. Crude oil prices advanced to approximately $60 per barrel (WTI), driven by optimism over global demand recovery and limited growth in US production. Gold, conversely, faced significant headwinds, retreating from earlier highs above USD 3,400 down to nearly USD 3,200 as easing geopolitical fears and stronger economic optimism diminished safe-haven appeal.

Currencies

The US dollar strengthened markedly against major currencies, bolstered by improving global risk sentiment and positive developments in international trade negotiations. EURUSD tested crucial support at 1.1200, and USDJPY approached significant resistance near 146.00. Sterling saw muted volatility following the Bank of England’s rate cut, while commodity-linked currencies benefited slightly from the overall risk-on atmosphere.

Looking Ahead (Week of May 12 to 16)

Investors face a busy week with several critical economic releases and corporate earnings announcements.

• Key economic data: The release of the US CPI on May 13 will be closely watched as a gauge of inflation, with potential implications for future Fed policy. Retail sales figures on May 15 and consumer sentiment data on May 16 will provide further insights into the health and resilience of the consumer amid ongoing trade and tariff issues.
• Earnings: Earnings season continues with significant results expected from retail giant Walmart, tech leader Cisco Systems, gaming company Take-Two Interactive, Chinese e-commerce major Alibaba, agricultural machinery manufacturer Deere & Co., and semiconductor equipment firm Applied Materials. These reports will offer key insights into the state of various sectors amid global economic uncertainty.
• Central Banks: Multiple Federal Reserve officials, including Chair Jerome Powell, will speak this week, providing markets with potentially critical signals regarding the future direction of monetary policy, especially amid ongoing pressures from tariff developments and inflation dynamics.

Concluding Remarks

As markets digest recent trade developments and upcoming critical economic data, investors should brace for potential volatility spikes, particularly around inflation and consumer sentiment reports. The evolving trade landscape and central bank communications remain pivotal in shaping market expectations and risk appetite moving forward.

For more details on each day’s movements, refer to the daily Quick Takes: