U.S. – China: can’t live with you, can’t live without you

Last week was met with a fair degree of apprehension by analysts and investors alike. Following a 6% rally in May, markets found themselves pressing against key resistance levels – significant from both a technical and psychological standpoint – and there was little clarity as to whether they could be overcome. For much of the week, the indexes appeared to stall, occasionally showing signs of weakness, which only added to the unease among market participants.

Further jitters came midweek, when ADP’s labour market report revealed a sharp decline in the number of new jobs created in May. The mood darkened further as a public spat unfolded between President Trump and Elon Musk, leading to a steep sell-off in Tesla (TSLA) shares. All told, it would be difficult to describe the week as calm or reassuring.

And yet, in true U.S. fashion, the week concluded with something of a happy ending. On Friday, official figures from the U.S. Department of Labor painted a more favourable picture than expected. The May non-farm payrolls report showed an increase of 139,000 jobs – well above the forecast of 126,000. The stronger-than-expected data gave the market a much-needed lift and offered investors a brief reprieve from the political theatre unfolding at the White House, where President Trump continues to lock horns with Tesla and its CEO.

Markets responded enthusiastically, staging a sharp rally on Friday and finishing the week firmly in positive territory. All major U.S. indexes posted gains: the Dow Jones Industrial Average (DJIA-30) rose by 1.17%, while the NASDAQ Composite (IXIC) led the way with a weekly gain of 2.18%. The benchmark S&P 500 (SPX) climbed 1.50%, closing at a symbolic 6000 points – leaving it just over 2% shy of its all-time high.

At the sector level, there were further signs of improvement. While recent weeks had seen defensive names take the lead – notably within the Consumer Defensive sector – investors are now clearly embracing more risk, rotating into faster-moving, potentially more lucrative areas such as technology and communications. As a result, the tech sector gained 3.24% on average, with ON Semiconductor (ON) standing out as one of the week’s best performers, soaring by over 17%.

The ITS family of indexes also delivered strong results. The ITS World Index (ITSW), which tracks global companies, added 2.02% – almost mirroring the NASDAQ’s performance. Notably, ITSW set a new closing high, reaching 1324.83 points – a level last seen on 20 February, more than three and a half months ago.

The ITS Shariah Index (ITSS) also posted a respectable gain of 0.97% for the week. Its performance was held back, however, by the sell-off in Tesla, which saw its shares tumble by 16.98% due to the ongoing clash between Trump and Musk. Tesla is a constituent of both ITSW and ITSS, though its weighting is much greater in the latter – 7.2% compared to just 1.3% – meaning the impact was more acutely felt by the Shariah index. Even so, both indexes managed to finish the week in positive territory.

Overall, the week’s upbeat conclusion brings a measure of cautious optimism, with hopes now pinned on further gains in the near term. The path higher may be uneven – but the prospect of fresh record highs, particularly for the S&P 500, remains very much alive.

 

 

Market outlook for 9 June

The week begins with a dose of optimism: trade negotiations between the U.S. and China are set to take place in London over the coming days. The composition of the delegations speaks to the seriousness of the talks. Representing the United States will be Treasury Secretary Scott Bessent, U.S. Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick. The Chinese delegation will be led by Vice Premier He Lifeng.

You might expect such news to lift market sentiment – but for now, the reaction has been muted. Only the Hang Seng index in Hong Kong showed a clear uptick, gaining nearly 1.5%. U.S. index futures, on the other hand, are hovering near flat with a slight downward bias. In short, there’s little sign of celebration. Still, if the talks prove successful, they could provide a strong boost to markets – not just in the U.S., but globally.

That said, trade negotiations are far from the only focal point this week. In fact, there may be even more important matters on the agenda. The release of May inflation data – the CPI on Wednesday and the PPI on Thursday – is expected to have a major impact on market dynamics. These figures will offer a clearer picture of how the U.S. economy is coping with President Trump’s recent tariff initiatives. The market’s response will likely hinge on whether the data meets expectations – and if it falls short, the reaction could be sharply negative.

On the corporate side, tension is easing as earnings season winds down. Only a few high-profile reports remain, with the potential to briefly reignite investor interest. This week’s highlights include Oracle Corp (ORCL), which reports after the bell on Wednesday, and Adobe Inc. (ADBE), whose results are due on Thursday. Both companies are expected to post strong numbers – and many analysts believe those expectations are well-founded.

For short-term traders, however, this week offers something more explosive. GameStop Corporation (GME), one of the original “meme stocks”, reports its latest earnings after Tuesday’s close. GME is also available for trading on the ITS platform – so those in search of high-stakes action are welcome to take part. The only question is which way the shares will go – up or down?

All things considered, this is shaping up to be a lively and eventful week. Market sentiment remains broadly positive for now, and there is hope that the incoming news flow won’t spoil the mood. Still, now is not the time for complacency – political and economic surprises continue to throw markets off course. But if developments unfold in a favourable direction, there’s a real chance that markets could approach their all-time highs by the week’s end.