The war in Iran is about to enter its twelfth week and, as no outcome seems to be in sight with negotiations still at an impasse, its impact on the real economy – and, more precisely, on inflation and growth – is causing increasing concern.
However, the dark clouds hovering over the economy are not, for the moment, affecting the performance of global equity markets. After the initial shock, they largely ignored geopolitical issues in the Middle East, with artificial intelligence (AI) currently dominating the landscape, particularly on the New York Stock Exchange.
Overview of market prospects in the days to come:
1/ BREAD ON THE BOARD
US President Donald Trump on Friday concluded a two-day summit in Beijing with his Chinese counterpart Xi Jinping, which, according to one analyst, the markets would judge “strategically reassuring, but disappointing in substance”, with few concrete results.
Finance ministers and central bank governors from the Group of Seven (G7) countries will also meet Monday and Tuesday in Paris, with many topics on the agenda, from the impasse in Iran to securing supply chains for critical minerals, including oil prices and recent market volatility global bond.
In the absence of progress on the diplomatic front, the prices of Brent crude from the North Sea, the global market benchmark, remain well above $100 per barrel LCOc1 and, even if operators and investors assume that a peace agreement will eventually be concluded, the risk of repercussions negative effects on the economy are increasing day by day.
As if all these challenges weren’t enough, bond markets – from the UK to Japan to the US – are being buffeted by a variety of factors, including rising inflation indicators, political instability and, above all, a radical change in investors’ expectations for the evolution of rates. of interest.
2/ FROM AI TO GREAT RETAILING The solid season of first quarter results for American companies will end next week with two heavyweights, the semiconductor giant intended for AI Nvidia NVDA.O and the world’s leading retailer Walmart
WMT.O
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The results and prospects of Nvidia, the world’s largest stock market capitalization, are considered a key indicator of the sector at the heart of the stock rally.
Its quarterly results, which will be released on Wednesday, also come at a time when the AI craze has boosted a wide range of semiconductor sector stocks.
Results from Walmart and other retailers reporting in the coming days, including Home Depot HD.N , Target TGT.N and TJX Cos TJX.N , will also have investors’ attention, looking for clues that war-driven inflation in the Middle East could weigh on earnings. consumer spending.
According to LSEG IBES, profits of S&P 500 companies should have increased by more than 28% in the first quarter compared to the same period of the previous year.
3/ VIEWS ON DOWNING STREET Data on the labor market and inflation in the United Kingdom, scheduled for Tuesday and Wednesday respectively, may not be well received by political and monetary leaders, but the market will be especially attentive to the evolution of the crisis at the head of the British government, which has triggered a storm on government bonds in recent days.
British Prime Minister Keir Starmer has been facing intense pressure for a week to convince him to leave power, with many Labor officials deeming him responsible for the historic electoral rout recorded by Labor during local elections earlier this month.
As the impact of the war in Iran on energy prices wreaks havoc on bond markets globally, domestic political uncertainty is doing nothing to improve the situation, further stoking concerns about the fragility of Britain’s finances.
The sharp rise in UK government financing costs this week is proof of this, with the yield on 10-year government bonds GB10YT=RR reaching its highest level since July 2008 on Friday.
If the inflation figures published on Wednesday show further progress and the markets anticipate an even more marked tightening of the monetary policy of the Bank of England (BoE) this year, the wave of sales of Gilts could amplify.
4/ PERFORMANCE GAP
Whatever Nvidia’s results next week, investors will be watching to see whether they widen or help narrow the growing performance gap between U.S. and European stocks.
Disruptions to global energy supplies are hitting Europe hardest, given the region’s greater dependence on imports compared to the United States.
In addition, the solid results recorded by large American technology companies and the increasing weakening of European consumption accentuate the performance gap.
The S&P 500 index .SPX has gained 8.8% since the start of this year, compared to 3.3% for the STOXX 600 index .STOXX. The comparison is even more striking since the start of the war in Iran at the end of February: the S&P 500 gained 8.3% in March and April, while the STOXX lost 3%.
5/ THE COST OF OIL Japanese gross domestic product (GDP) figures for the first quarter, which will be published on Tuesday, should give an overview of the impact of rising energy prices on an economy which depends heavily on oil imports.
Policymakers will monitor them closely, striving to balance growing inflationary pressures with risks of slowing growth.
The GDP figures will be followed, during the week, by those of foreign trade and inflation, which could strengthen the arguments in favor of an upcoming increase in interest rates by the Bank of Japan (BoJ).
Elsewhere in Asia, data on house prices and retail sales in China are due on Monday. The world’s second-largest economy continues to be plagued by a struggling real estate market and anemic domestic consumption, even as overall growth dynamics show signs of resilience.
(Infographics by Kripa Jayaram, compiled by Amanda Cooper; French version Diana Mandiá, edited by Augustin Turpin)
