1) 📊 Last Week in Review
Week ending 8 May 2026
Performance snapshot:
- FTSE 100: 10,233 | -1.3% (YTD c.+6.6% est.)
- S&P 500: 7,399 | +2.3% (YTD +8.1%)
- MSCI World: 4,757 | +1.8% (YTD +8.1%)
- UK 10y gilt yield: 4.92% (-5 bp) | US 10y: 4.36% (-2 bp)
- GBP/USD: 1.3620 (c.+0.3%) | Brent: c.$101 (-6.4%)
What moved markets:
- US jobs surprised positively: payrolls rose 115,000 versus expectations near 55,000, helping US equities push to fresh highs.
- Oil fell despite war risk: Brent ended the week lower, easing some inflation pressure.
- UK shares lagged: political uncertainty and weaker global energy sentiment weighed on the FTSE 100.
Sector & style:
- Best/Worst sector: Information Technology +6.9% / Energy -5.2%.
- Growth vs Value: Growth led, with Nasdaq beating the Dow by roughly 4.3 percentage points.
- Large vs Small: Large caps led by around 0.6 percentage points versus Russell 2000.
So what?
- The market enters this week in risk-on mode, but with inflation data and geopolitics able to upset the rally quickly.
- For UK investors, the key question is whether gains in US/global equities are helped or diluted by moves in GBP/USD.
2) 🌟 The Defining Narrative
Can inflation stay calm enough to keep the AI-led equity rally alive
Why it matters:
US equities are priced for a strong earnings recovery and continued AI investment. This week’s US CPI, US PPI and UK GDP data will test whether bond yields can stay contained, which matters for equity valuations, gilts and sterling.
What confirms it / what breaks it:
- Confirms: Softer US inflation, steady UK GDP and no fresh oil shock.
- Breaks: A hot CPI/PPI print, Brent moving sharply higher, or renewed bond-market stress.
3) 🏦 Central Bank Watch
Bank of England
- What’s scheduled: Sam Woods speech Tuesday; Catherine Mann speech Wednesday, with text due 15:00 and speech at 18:00 UK time. (Bank of England)
- Market pricing: Bank Rate is 3.75%; next decision is 18 June. (Bank of England)
- Key thing to listen for: Imported inflation, oil prices and whether UK rates may need to stay higher for longer.
- UK implications: Hawkish language could lift gilt yields and support sterling.
Federal Reserve
- What’s scheduled: No FOMC decision; the real Fed catalyst is US CPI Tuesday 13:30 and PPI Wednesday 13:30.
- Market pricing: After the jobs data, markets priced only around a 5% chance of a June cut. (Barron’s)
- Key thing to listen for: Whether inflation is re-accelerating.
- UK implications: Higher US yields can pressure global growth stocks and move GBP/USD.
European Central Bank
- What’s scheduled: Philip Lane and Christine Lagarde speak on Wednesday evening; Lagarde also appears Thursday morning. (European Central Bank)
- Market pricing: Deposit rate is 2.00%; markets are watching whether rate-hike risk is returning.
- Key thing to listen for: Whether energy and wage risks are changing the ECB’s tone.
Bank of Japan
- What’s scheduled: Japan corporate goods prices Friday 00:50 UK time; BoJ communication remains focused on inflation and the yen.
- Market pricing: Policy rate is 0.75%, after an April hold with dissenting votes for a move to 1.0%.
- Key thing to listen for: Yen weakness, intervention risk and wage-driven inflation.
- UK implications: Yen volatility can spill into global bond and equity risk appetite.
4) 🌍 Macro Calendar
| Day (UK) | Region Event | Why it matters |
|---|---|---|
| Monday 11 May | China — CPI / PPI | Important read on Chinese demand and global goods inflation. Matters for miners, Asia equities and commodity sentiment. |
| Tuesday 12 May, 13:30 | US — CPI inflation | The key event of the week. A hot number could push bond yields higher and hurt growth shares; a softer number supports the risk rally. (Bureau of Labor Statistics) |
| Tuesday 12 May | Germany — CPI inflation | Helps confirm whether European inflation pressure is still easing or starting to reheat. |
| Wednesday 13 May, 13:30 | US — Producer Price Index | Shows pipeline inflation for companies. If producer costs rise, it can squeeze margins or feed future consumer inflation. (Bureau of Labor Statistics) |
| Thursday 14 May, 07:00 | UK — Q1 GDP / monthly GDP | Big test of UK growth momentum. Stronger growth could support sterling but may reduce the case for early BoE cuts. (Office for National Statistics) |
| Thursday 14 May, 13:30 | US — Retail sales | Checks whether the US consumer is still spending. This matters because consumer strength underpins earnings expectations. (Barron’s) |
| Thursday 14 May, 13:30 | US — Import / export prices | Useful inflation read, especially with oil, tariffs and currency moves in focus. (Bureau of Labor Statistics) |
| Friday 15 May | US — University of Michigan consumer sentiment | A timely read on household confidence and inflation expectations. Can move bonds, the dollar and equities. (LiteFinance) |
| Friday 15 May | Japan — Corporate goods prices | Important for Bank of Japan policy because it shows whether inflation pressure is still building in the corporate sector. |
5) 📊 Earnings Watch
US
- Constellation Energy (CEG) — Monday: focus on power demand and nuclear exposure.
- Cisco (CSCO) — Wednesday: expected EPS around $1.04; key issue is AI/data-centre orders.
- Alibaba (BABA) — Wednesday: cloud growth and China consumer demand.
- Applied Materials (AMAT) — Thursday: semiconductor equipment demand and AI capex read-through.
UK
- Compass Group (CPG) — Monday: margins, contract wins and wage pressure.
- Vodafone (VOD) — Tuesday: German performance, service revenue and free cash flow.
- Imperial Brands (IMB) — Tuesday: pricing power and shareholder returns.
- National Grid (NG.) — Thursday: capex, regulation and balance-sheet funding.
Europe / Global ex-US
- Siemens Energy — Tuesday: grid demand, gas turbines and order backlog.
- Munich Re — Tuesday: catastrophe losses, pricing and capital returns.
- Tencent — Wednesday: advertising, gaming and AI/cloud growth.
- Mitsubishi UFJ / Mizuho — Friday: Japanese rate sensitivity and bank margins.
6) 💷 Fixed Income & Currency Outlook
A) UK Gilts / Rates
- Facts: UK 2y yield around 4.38% and 10y around 4.92%, both slightly lower on the week. (Trading Economics)
- View: Neutral — yields are attractive, but long gilts remain vulnerable to inflation and politics.
- Watchlist: UK GDP, BoE speeches, oil prices.
- UK portfolio implication: Gilts can still diversify, but longer duration is not a “safe parking place” when inflation risk is live.
B) FX — GBP focus
- Facts: GBP/USD near 1.3620; GBP/EUR around 1.157. (cambridgecurrencies.com)
- View: Neutral / range-bound GBP — sterling needs stronger UK data to break higher.
- Watchlist: US CPI, UK GDP, rate differentials, oil.
- UK portfolio implication: A stronger pound reduces sterling returns from unhedged overseas funds.
7) 🧠 Sentiment Check
- Current mood: Risk-on, but cautious.
Market gauges:
- VIX / MOVE: VIX near 17 signals calmer equity markets; MOVE near 67 shows bond volatility has eased.
- Rates: US and UK 10-year yields edged lower last week, helping growth equities.
- Credit spreads: US high-yield spreads remain tight, suggesting investors are not demanding much extra protection. (
- CNN Fear & Greed Index: around 67–69, in “Greed” territory.
Positioning / flows:
- Earnings season remains supportive: most S&P 500 companies have reported, with a high proportion beating expectations.
- The rally is still heavily dependent on large-cap technology and AI-linked earnings.
Implication:
- Sentiment is supportive, but not cheap.
- A hot CPI print could trigger a sharper reaction because investors are already leaning optimistic.
8) 📈 Valuations & Expectations
Valuation snapshot:
- S&P 500 fwd P/E: 21.0x, above its 5-year average of 19.9x and 10-year average of 18.9x.
- Implication: The US is priced for strong earnings delivery; the UK is cheaper, but more exposed to banks, energy, miners and sterling moves.
Earnings expectations:
- Next-year EPS growth: US c.16% based on consensus EPS rising from $327.87 in 2026 to $380.79 in 2027.
- Revisions trend: US revisions are improving, helped by mega-cap technology.
- Beat-rate context: earnings beats remain strong, but expectations are now higher.
So what?
- The US needs inflation to behave and earnings to keep beating.
- The UK needs stable growth, steady dividends and no renewed gilt shock.
9) 🗳️ Geopolitics & Wildcards
- Event: Iran conflict / Strait of Hormuz risk
Impact channel: oil, shipping, inflation
What to watch: any threat to energy supply routes - Event: Trump-Xi meeting in Beijing
Impact channel: trade, tariffs, technology, sanctions
What to watch: language on tariffs and Iran - Event: UK politics and King’s Speech
Impact channel: fiscal policy, regulation, gilt sentiment
What to watch: spending commitments and growth reforms - Event: Yen intervention risk
Impact channel: FX volatility, global liquidity
What to watch: Ministry of Finance language and BoJ signals
10) ⚡ The Bottom Line
- If US CPI comes in hotter than expected → then yields likely rise and growth stocks wobble → watch US 2-year yields, Nasdaq and GBP/USD.
- If UK GDP beats expectations → then sterling and gilt yields may rise → watch GBP/USD near 1.37 and UK 10y gilts near 5%.
- If oil falls and geopolitics calm → then the risk rally can broaden beyond AI → watch Brent, European equities and emerging markets.
© Clearly Investments Ltd. Educational information only. This is not investment advice.
