US markets continue to hit new records

US equity indices continued to rally as first‑quarter earnings signalled a robust performance by corporate America. Gains were again led by technology stocks, with optimism around artificial intelligence driving a surge in semiconductor and mega‑cap names such as Nvidia, pushing the S&P 500 and Nasdaq to fresh record highs despite a mixed economic backdrop. Nvidia is due to report its first‑quarter results next week, the last of the so‑called “Magnificent Seven” to do so.

Charles Stanley’s chief investment officer Patrick Farrell examines how markets continue to price in optimism even as risks remain elevated.

The FTSE 100 was flat over the week by mid‑session on Friday, while the more UK‑focused FTSE 250 traded 1.6% lower.

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Middle East

In the Middle East, the outlook remains highly uncertain. Negotiations continue but positions remain entrenched and violence persists, leaving the risk of broader regional escalation firmly in place. That said, there were more constructive diplomatic signals from the meeting between US president Donald Trump and China’s President Xi Jinping in Beijing, where both sides emphasised the importance of keeping the Strait of Hormuz open to safeguard global energy flows.

However, US president Donald Trump also said the ceasefire with Iran was “on life support”, underlining the fragile state of negotiations as the gap between the two sides’ demands remains wide. Drone attacks and strikes on shipping in the Gulf – including an incident involving a cargo vessel off Qatar – have added further strain, even as both sides maintain that the ceasefire formally holds. Military activity in and around the Strait of Hormuz has continued, with US and Iranian forces exchanging strikes and accusations of violations. Iran has also tightened its control over the waterway, disrupting maritime traffic and fuelling volatility in global energy markets.

China did signal a willingness to play a stabilising role, with President Xi indicating that Beijing could use its position as a major buyer of Iranian oil to help ease tensions.

The meeting also produced tentative trade developments, including claims of large‑scale Chinese purchases of US goods such as aircraft and energy, although details remain limited and any broader breakthrough appears some way off. Strategically, the summit highlighted both cooperation and rivalry: Mr Xi warned that mishandling Taiwan could risk “clashes and even conflicts”, underscoring persistent geopolitical faultlines even as both sides emphasised stability.

Meanwhile, the latest monthly reports from the International Energy Agency (IEA) and Opec delivered a stark assessment of the situation. The IEA described disruption through the Strait of Hormuz as an “unprecedented” supply shock, citing losses of more than 12 million barrels a day since February and a rapid drawdown in global inventories, alongside an expected decline in oil demand as higher prices weigh on growth. Opec struck a more optimistic note, trimming its 2026 demand growth forecast but still expecting an expansion rather than the contraction forecast by the IEA, arguing that global economic resilience will cushion the impact of higher prices.

UK elections

UK prime minister Sir Keir Starmer has been left politically exposed following a bruising set of local election defeats, which saw Labour lose ground in core areas and triggered open dissent within the party. Calls for his resignation from dozens of MPs have turned what might normally be a mid‑term setback into a full‑blown leadership crisis, raising questions about both his authority and Labour’s broader electoral appeal.

Greater Manchester mayor Andy Burnham has announced plans to stand in a by‑election after Labour MP Josh Simons said he would step down, intensifying speculation about a potential leadership challenge from within the party ranks.

The political turmoil has spilled into financial markets. UK 10‑year gilt yields have risen above 5% as investors sell off government debt and demand higher returns to compensate for heightened risk, while sterling has weakened against major currencies. At the heart of the reaction are concerns over fiscal credibility, with investors questioning whether a weakened or potentially replaced prime minister could maintain spending discipline.

Economics

The US Producer Price Index (PPI) showed a sharp and unexpected rise in wholesale inflation, pointing to renewed price pressures in the economy. Producer prices rose 1.4% month on month in April, pushing the annual rate up to 6.0% – the highest level since late 2022. The increase was driven largely by higher energy costs, particularly gasoline, but was broad‑based, with services inflation also accelerating and core measures rising more strongly than expected. The figures suggest that cost pressures are building across supply chains and are likely to feed through to consumers, complicating the outlook for interest rates.

In the UK, GDP data painted a picture of modest but fragile growth. The economy expanded by 0.6% in the first quarter of 2026, up from 0.2% in the final quarter of last year, supported largely by a resilient services sector. Monthly growth in March surprised to the upside at 0.3%. However, economists warned that the strength may prove temporary, pointing to underlying volatility, possible distortions in the data and mounting headwinds from higher energy prices, geopolitical tensions and softening demand, leaving the outlook for the second quarter uncertain.

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Wise’s US debut was underwhelming, with the shares falling on their first day of trading and continuing to drift lower in subsequent sessions. The stock dropped about 3.5% from its opening price on Nasdaq, signalling a lukewarm reception from investors despite strong underlying growth and the strategic ambition behind the move. The flotation itself was not a traditional IPO but part of a broader shift to a dual listing, with Wise moving its primary listing from London to New York. However, that strategic pivot has been controversial. The company bundled the listing move with an extension of its dual‑class share structure, effectively preserving outsized voting control for its founders. Critics – including a co‑founder – argued this undermined shareholder democracy and diluted investor rights, while proxy advisers also raised governance concerns. 

Vodafone reported a solid full‑year performance, with revenues rising about 8% to €40.5bn and service revenue up 8.8%, helping the group swing back to profit and deliver earnings at the top end of guidance. A key driver was the integration of Three UK following last year’s merger, which has already begun to boost scale and revenues, particularly in the UK, while Vodafone also moved to take full ownership of the combined VodafoneThree business in a £4.3bn buyout, underlining its strategic focus on core markets and confidence in delivering synergies from the tie‑up. 

Burberry delivered a cautiously encouraging set of full‑year results, showing early signs of a turnaround as the British luxury group returned to profit and modest sales growth after a difficult period, with comparable store sales up 2% and revenue broadly flat at around £2.4bn.  Margins improved significantly – with the operating margin rising to about 6.6% - helped by tighter cost control, lower discounting and a stronger mix of full‑price sales, while momentum picked up toward the end of the year with improving demand in key markets such as China and North America. 

Catering group Compass delivered a strong set of half‑year results, with revenue rising about 9% to $25bn and underlying operating profit up 12%, as robust demand for outsourced catering and a surge in new contract wins underpinned growth across its global business. The group pointed to high client retention and $4.1bn of new business — much of it from first‑time outsourcing - alongside improving margins, prompting management to upgrade full‑year profit guidance to above 11% growth, signalling confidence in continued momentum despite broader economic uncertainties.

Land Securities delivered a steady set of full‑year results, with revenue rising to £892m but profits slipping to around £343m, reflecting the impact of valuation movements despite improving underlying property income. The property group pointed to strong rental growth – the fastest in nearly two decades - and a 20‑year high in occupancy, helping drive a modest rise in earnings and a higher dividend, underpinned by tight cost control and a more focused portfolio. 

National Grid reported a strong set of full‑year results, with earnings and operating profit rising despite a modest fall in revenue, as higher returns from its regulated networks and tight cost control offset the impact of disposals and external factors. The results were accompanied by a clear strategic pivot, with the utility unveiling a £70bn investment programme over five years – the largest in its history – aimed at expanding electricity networks in the UK and US to support the energy transition.

Greggs reported an improved start to 2026, with total sales up 7.5% to £800m in the first 19 weeks and like‑for‑like growth of 2.5%, accelerating to 3.3% in recent weeks as menu innovation and new product launches helped drive momentum in what it described as a “challenging market”. The high street bakery said profit performance has been encouraging and reiterated full‑year guidance, supported by tight cost control and continued store expansion, although it warned that inflation – currently expected at around 3% - could rise if geopolitical pressures persist, underlining a cautiously optimistic outlook despite ongoing pressures on consumers. 

ITV reported a steady but mixed start to the year, with group revenue broadly flat at about £877m as growth in its Studios division and digital business offset continued weakness in traditional broadcasting. Studios revenues rose 4% on strong demand from global streaming platforms, while digital advertising jumped 14% and viewing on ITVX hit record levels, underlining the group’s shift toward online. 

German engineer Siemens delivered a resilient second‑quarter performance, with orders surging 18% to a record €24.1bn and revenue up 6% on a comparable basis, driven by strong demand in digital industries, infrastructure and AI‑linked sectors, even as headline sales and profits were weighed down by currency headwinds and the absence of prior‑year one‑offs. 

China’s two biggest technology groups delivered mixed but broadly resilient results this week, with both highlighting artificial intelligence as the key driver of future growth. Alibaba posted modest revenue growth of around 3% alongside a sharp decline in profitability, as heavy spending on AI, cloud infrastructure and rapid‑delivery services weighed on earnings. By contrast, Tencent reported stronger profit growth, with net income rising more than 20% and revenues up about 9%, supported by gains in gaming, advertising and cloud services, although growth fell short of expectations and margins were pressured by rising AI investment costs.