US indices have now risen for six consecutive weeks. Since their late-March lows, the S&P 500 has rallied by more than 15% and the Nasdaq by more than 25%. Investors remain fixated on a single theme: buy AI, then buy some more AI. That explains why the gap between US and European equities is widening again. On Friday, the Euro Stoxx 50 fell 1%, the Dow Jones ended flat and the Nasdaq 100 gained 2.35%. It is a perfect snapshot of investing in the AI era.

The continuing fallout from the war in the Middle East once again shows the market's ability to move on. The comparison with last year's tariffs is obvious. The market sell-off was quickly erased and indices resumed their upward march, even though the tariffs stayed in place. True, Donald Trump eased the burden a little, but 2025 still ended with US trade barriers at their highest level in a century. In 2026, the Strait of Hormuz remains blocked, yet US indices have still rediscovered their forward momentum. Had I laid out this year's scenario for you on 1 January, you would hardly have bet on the S&P 500 being up 8% and the Nasdaq up 16%. Nor, for that matter, would you probably have backed oil at more than USD 100 a barrel. What matters is the direction of travel.

Over the weekend, Iran submitted a counter-proposal to the United States on the Middle East peace plan. A few hours ago, Donald Trump dismissed it as unacceptable. Brent crude moved back from USD 101 to USD 105 a barrel. The saga drags on, though the episodes are beginning to look rather similar. Costly oil works its way into every part of the economy. The longer it goes on, the worse it gets. For now, however, Wall Street is proving increasingly resilient to geopolitical shocks. That is mainly because the US economy appears barely affected. On Friday, the United States reported April job creation well above expectations. It was the first time in a year that the US economy had created jobs for two months in a row. Beyond that report, every statistic published in recent weeks points in the same direction: the US economy is in good shape, the labour market remains solid and corporate earnings are dazzling, especially at companies benefiting from the vast sums being poured into AI.

I have already bored you senseless with the almost unbelievable rise in US corporate earnings in the first quarter. The figure climbed again after last week's round of results. On average, earnings per share for S&P 500 companies are up 27.7% year on year, according to FactSet. That is remarkable. Every sector apart from Healthcare, which is being squeezed by White House policy, is putting in a robust performance. But the truly spectacular contribution comes almost entirely from Technology, where earnings per share are up 50.7%. Strip out Nvidia and Micron, and that rise falls, if I can put it that way, to 28.5%. AI-powered semiconductor companies saw quarterly earnings grow by 99% year on year. Beyond that windfall, the season has also been flattered by exceptional items. Hyperscalers booked huge unrealised gains on their investments in AI companies such as OpenAI and Anthropic. Those gains accounted for as much as a third of their first-quarter profits, or USD 53bn, as the Alphaville article we cited last week noted, and Fortune had previously reported the same point. The ability to book huge capital gains on companies for which you are simultaneously funder, customer and supplier has two names. Genius when everything is going well. Ponzi when things start to go wrong.

In this environment, the Fed can afford to take comfort from the labour market and focus on the other half of its mandate: inflation. The timing is neat, since inflation is the first major event of the week, with the US consumer price index, CPI, due on Tuesday and the producer price index, PPI, on Wednesday. China got the ball rolling overnight, and the least one can say is that things are changing there because of energy prices. Annual inflation accelerated to 1.2%, compared with forecasts of 0.8%, while producer prices jumped 2.8% year on year, against expectations of 1.5%.

China and the United States will also be in focus this week, but together this time, with Donald Trump's visit to Beijing on Thursday and Friday. The last visit to China by a US president dates back to 2017. The president in question was, of course, one Donald Trump. The two leaders are expected to discuss tariffs, the war in Iran and Taiwan, among other issues. The summit is unlikely to produce any major breakthrough, but the mere fact that the world's two largest powers are talking is already good news. And should a big contract emerge from it, Boeing aircraft, say, entirely at random, Donald Trump would have a trophy to bring home.

Among the other stories worth watching at the start of the week:

  • Vladimir Putin said he believes the war in Ukraine is nearing its end, amid rumours that the EU could reopen negotiations with Russia.
  • The United Kingdom and France are organising a multinational meeting on the mission to escort ships through the Strait of Hormuz.
  • Benjamin Netanyahu said the war in Iran will not be over as long as Tehran retains nuclear capabilities.
  • In India, Prime Minister Modi urged citizens to reduce fuel consumption to avoid shortages.
  • In the United Kingdom, Prime Minister Keir Starmer, under pressure, is due to deliver a major speech on Monday.
  • A US Senate committee is due to examine the long-awaited cryptocurrency bill next week.

On the corporate calendar, a few big names are still due to report, even though more than four-fifths of major Western companies have already published their first-quarter results. Siemens Energy, Cisco, Allianz and Applied Materials are among those expected. Several Asian companies will also join the reporting season, including Tencent, Alibaba, Mitsubishi Heavy, SoftBank and Kioxia.

In Asia-Pacific, Chinese equities are shining. The mainland Shanghai Composite index has hit an 11-year high. South Korea is continuing at a blistering pace thanks to AI-linked stocks such as Samsung and SK Hynix, gaining another 5%. Elsewhere, the picture is far more mixed: Japan is down 0.2%, Australia 0.6% and India 1.5%. European futures are uncertain.

Today's economic highlights:

On today's agenda: China's monthly and yearly inflation rates along with the PPI; in the United States, existing home sales and their monthly change; in Canada, the Bank of Canada's Market Participants Survey. See the full calendar here.

  • GBP / USD: US$1.36
  • Gold: US$4,658.07
  • Crude Oil (BRENT): US$105.37
  • United States 10 years: 4.4%
  • BITCOIN: US$80,829.3

In corporate news:

  • HSBC disclosed a $400 million fraud-related provision tied to its UK business in its first-quarter results and has reviewed its lending policies, finding no systemic issues.
  • Rio Tinto signed a 30-year Power Purchase Agreement with Yindjibarndi Energy for the Jinbi solar project, expected to begin operations in mid-2028.
  • Tenaris is set to acquire the Artrom Steel Tubes seamless pipe manufacturing plant in Romania.
  • Argenx announces FDA approval of the expanded use of Vyvgart and Vyvgart Hytrulo for all adult patients with GMG.
  • Swatch is launching a watch in collaboration with its competitor Audemars Piguet.
  • ABB is set to invest $200 million in medium-voltage equipment production in Europe.
  • ThyssenKrupp Nucera expects significantly lower-than-expected revenue for fiscal Q2.
  • Apollo and Blackstone are considering a $35 billion financing package for Broadcom, according to Bloomberg News.
  • Apple and Intel have reached a preliminary agreement on chip manufacturing. Additionally, Apple plans design adjustments to macOS 27 to address instability issues in Tahoe, according to Bloomberg.
  • Lumentum will join the Nasdaq 100 on May 18, replacing Costar.
  • Anthropic has signed a $1.8 billion deal with Akamai for computing power.
  • Michael Burry is positioning himself in MercadoLibre following its decline.
  • Today’s key earnings reports: Constellation Energy, Barrick Mining, Simon Property, Circle Internet, Fox Corporation, Compass, Hochtief, Hannover Re, GEA Group…

See more news from UK listed companies here

Analyst Recommendations:

  • 3I Group Plc: Barclays maintains its overweight recommendation and reduces the target price from GBP 44.55 to GBP 42.75.
  • Intercontinental Hotels Group Plc: Citi maintains its sell recommendation and raises the target price from USD 115 to USD 127.
  • Helios Towers Plc: Morgan Stanley maintains its overweight recommendation and raises the target price from GBX 250 to GBX 295.
  • Shell Plc: Gerdes Energy Research LLC maintains its buy recommendation and raises the target price from USD 109 to USD 115.
  • Maire S.p.a.: BNP Paribas downgrades to neutral from outperform and raises the target price from EUR 14 to EUR 16.
  • Solvay Sa: BNP Paribas maintains its underperform recommendation and reduces the target price from EUR 23 to EUR 22.
  • Asml Holding N.v.: BNP Paribas maintains its outperform rating and raises the target price from USD 1800 to USD 1850.
  • Abb Ltd: Morgan Stanley maintains its market weight recommendation and raises the target price from CHF 62 to CHF 74.
  • Mandatum Oyj: Inderes maintains its reduce recommendation and raises the target price from EUR 6.30 to EUR 6.40.
  • Bechtle Ag: Cantor Fitzgerald maintains its overweight recommendation and reduces the target price from EUR 43 to EUR 41.
  • Intesa Sanpaolo S.p.a.: Morgan Stanley downgrades to market weight from overweight and reduces the target price from EUR 6.80 to EUR 6.60.
  • Bmw Ag: Landesbank Baden-Wuerttemberg maintains its buy recommendation and raises the target price from EUR 100 to EUR 103.