But let's start with a staggering figure: +17.4%. This is the increase posted by the Nasdaq 100 over the trading month, i.e. between the third Friday in April and the third Friday in May. This is quite simply the biggest increase ever recorded in the 21st century by the technology index. That shows how strong the momentum is right now. For several strategists at major investment banks, it's a sign that people have shifted from thinking “Trump's tariffs will cause the US economy to collapse” to “Trump's tariffs sting, but they won't derail the formidable US machine.” All in the space of a month.

The markets have been indulging in a blue-sky scenario. But on Friday evening, Moody's reminded investors that clear skies can cloud over quickly, downgrading America's sovereign credit rating and injecting a note of discomfort into the festivities. For the uninitiated, rating agencies assign grades - from the gold-standard AAA downwards - that signal the perceived financial robustness of a country, firm or institution. The better the grade, the cheaper it is to borrow. Risk, in essence, is what is being priced. And the message from Moody's is that the risk is rising.

On Friday, Moody's, one of the world's three largest rating agencies alongside Standard & Poor's and Fitch, downgraded the US credit rating by one notch from triple A to the next level down. This was quite unexpected because agencies tend to prepare the ground before making such moves. Moody's argues that the country's public debt and interest payments are significantly higher than those of other countries with comparable ratings. Growing debt, chronic deficits and a Congress that, administration after administration, remains unable to find common ground to get the budget back on track. The agency believes that the budget deficit will reach nearly 9% of GDP by 2035 (6.4% today) with public debt climbing to 134% of GDP, compared with 98% in 2024. Interest payments alone would then absorb nearly 30% of federal revenues.

The downgrade has rattled markets - particularly bonds, which were already uneasy about recent political and fiscal squalls. Yields on 10-year US Treasuries climbed to 4.5%, and the 30-year hit 5% - a round number that tends to unsettle nerves. US Treasury Secretary Scott Bessent was quick to shrug off Moody's decision, arguing that the fiscal picture is hardly a revelation and implying the agency is out of step. He may have a point. Rival firm S&P downgraded the US back in 2011 - and was promptly pilloried. The Obama administration led the charge, but the backlash was bipartisan. S&P's executives faced threats, its clients walked, its CEO exited, and the firm was eventually slapped with a hefty fine - officially unrelated to the downgrade, of course. If history is any guide, outrage in Washington knows no party lines. Nor does retribution.

What should we take away from the start of this new week? That despite the countermeasures aimed at Moody's, investors are more nervous than they were on Friday. The issue of the US budget and debt is never far from the headlines, but it has been brought back into the spotlight by the agency. That said, the market has a short memory, so it may well be alarmed this morning and forget all about it tomorrow. 

Here's what to watch as the week begins:

  • There are plenty of scheduled or rumored meetings this week. JD Vance and Ursula Von der Leyen. European leaders with Volodymyr Zelensky. Volodymyr Zelensky with JD Vance and Marco Rubio. The Europeans with Donald Trump. Donald Trump with Volodymyr Zelensky. Vladimir Putin with Donald Trump. Two conclusions can be drawn from this. First, these people would probably save time by meeting all together. Second, the more people there are, the harder it is to agree.
  • Former US President Joe Biden has been diagnosed with aggressive prostate cancer.
  • Donald Trump's tax cut package has cleared a key congressional hurdle after being blocked for several days due to disagreements among Republicans.
  • On the macro agenda: China kicked things off last night by announcing a stronger-than-expected rise in industrial production in April, while retail sales rose but less than economists had forecast. Other statistics to watch this week include the May PMI activity indicators for major economies, due on Thursday.
  • Israel has launched a new ground operation in Gaza.
  • On the corporate front, the earnings season is coming to an end. The pace is slowing significantly, although a few names such as Diageo, Palo Alto, Ryanair, Julius Bär and Generali should still provide some excitement. Several US retailers, such as The Home Depot and Target, will also be closely watched after the Walmart episode (the retailer said it was forced to raise prices due to tariffs, while Trump strongly recommended that it absorb the shock without passing it on to consumers).

In Asia-Pacific, equity markets started the week lower. Australia and China are down around 0.5%. The decline is close to 0.8% in Japan, while South Korea and Taiwan are down more than 1%. India is more or less bucking the trend, remaining flat during the session. Leading indicators are bearish, particularly in the US following the credit rating downgrade.

On today's agenda: in Switzerland, industrial production and retail sales year-on-year; in Spain, the consumer price index month-on-month and year-on-year; in the United States, the leading index. See the full calendar here.

  • GBP / USD: US$1.33
  • Gold: US$3,217.27
  • Crude Oil (BRENT): US$64.99
  • United States 10 years: 4.51%
  • BITCOIN: US$102,919

In corporate news:

  • Legal & General has acquired Proprium Capital Partners, expanding its assets and capabilities in the financial sector.
  • Vodacom announced a 1.3% increase in annual earnings.
  • Vienna Insurance Group has submitted a bid to acquire Moldasig S.A.
  • Bakkafrost reported lower-than-expected revenue and operating profit for Q1 2025, with an operational EBIT of DKK 505 million.
  • Ryanair anticipates that Boeing will adhere to their agreed contract prices, even in the face of new EU tariffs.
  • Nvidia is expanding its AI technology presence by showcasing new tech at Computex, launching NVLink Fusion and DGX systems, updating humanoid robot software, partnering with Foxconn for an AI factory in Taiwan, and negotiating investments in quantum computing startup PsiQuantum.
  • Microsoft has announced plans to develop AI agents capable of collaborating and retaining memories from their interactions.

See more news from UK listed companies here

Analyst Recommendations:

  • Astrazeneca Plc: Berenberg maintains its buy recommendation and raises the target price from USD 88 to USD 93.
  • Intercontinental Hotels Group Plc: Bernstein maintains its market perform recommendation with a price target reduced from 9000 to GBX 8990.
  • Kingfisher Plc: RBC Capital maintains its sector perform recommendation with a price target raised from GBX 255 to GBX 290.
  • J Sainsbury Plc: RBC Capital maintains its outperform recommendation and raises the target price from GBX 280 to GBX 300.
  • B&M European Value Retail S.a.: RBC Capital maintains its outperform recommendation and raises the target price from GBX 360 to GBX 375.
  • Dr. Martens Plc: RBC Capital maintains its sector perform recommendation and reduces the target price from GBX 70 to GBX 60.
  • Dcc Plc: RBC Capital maintains its outperform rating and reduces the target price from 5400 to GBX 5200.
  • Tesco Plc: RBC Capital maintains its sector perform recommendation with a price target raised from GBX 340 to GBX 350.
  • Future Plc: Barclays maintains its overweight recommendation and reduces the target price from 9.45 to GBP 9.
  • Ig Group Holdings Plc: Barclays maintains its overweight recommendation and raises the target price from 12.50 to GBP 13.80.
  • Standard Chartered Plc: Barclays maintains its equalweight recommendation and raises the target price from GBP 13 to GBP 13.60.
  • Legal & General Plc: HSBC downgrades to hold from buy with a target price reduced from GBP 2.65 to GBP 2.55.
  • Shell Plc: Wolfe Research maintains its outperform rating and reduces the target price from USD 80 to USD 78.
  • Conduit Holdings Limited: Jefferies maintains its buy recommendation and reduces the target price from 600 to GBX 585.
  • Ithaca Energy Plc: Jefferies downgrades to hold from buy with a target price reduced from GBX 145 to GBX 130.
  • Cvs Group Plc: Jefferies remains at a hold recommendation with a price target raised from 1028 to GBX 1250.