Stay up to date with the latest market trends, economic shifts and key financial developments across the UK, US and Asia.
Key market events
🔦 Spotlight on the UK-EU reset – A landmark trade deal has been reached between the UK and EU, aimed at revitalizing their post-Brexit relationship. Markets welcomed the news, with the British pound priced near a three-year high against the US dollar.
⬇️ US downgrade – Moody’s has downgraded the US sovereign credit rating from its century-old “Aaa” status - the last major agency to strip the US of its top tier rating. The downgrade reflects ongoing concerns about rising debt levels and long-term fiscal management.
💰 Major US tax and spending bill progresses – A comprehensive tax and spending bill - expected to add $3.8 trillion to the national debt over the next decade- narrowly passed through the US House of Representatives. The legislation now moves to the Senate, and is likely to undergo further modifications before being signed into law.
📈 UK inflation rises unexpectedly – CPI surged to 3.5% in April - the highest level since January 2024. Increases in household bills and transport costs contributed to a higher than expected rise. As a result, the likelihood of a Bank of England rate cut in August has decreased from 60% to 40%.
☀️ Sunny weather lifts UK retail sales – UK retail sales soared 1.2% in April, boosted by record sunshine. The gain will add around 0.1% to April GDP, pointing towards another quarter of growth.
What this means for financial advisers and clients
We saw something of a quiet echo of the market concerns that followed “Liberation Day” this week - a rare combination of falling US stocks, rising US government bond yields, and a weaker dollar. The message from markets? A clear signal of investors disapproval of the “One Big Beautiful Bill Act”, in a week where fiscal concerns were highlighted by Moody’s downgrade of US sovereign credit.
The continued troubles for the world’s largest economy - which still accounts for nearly 70% of the MSCI World Index - highlights the need for diversifying exposure across other regions. This is particularly important for non-US investors given the added impact of currency movements, and ongoing dollar weakness.
On a sunnier note, the UK economy continues to beat expectations, as does the government in securing trade deals with major partners. These are positive signs for our home market, which continues to trade at discounted valuations compared to long-term averages and peers.
Chart of the week - UK stocks poised for recovery?
Source: Gresham House
Why this matters
The chart above shows the UK 12-month forward price to earnings ratio relative to global equities (excluding UK). UK stocks briefly traded at par with global peers just before Brexit, but since then have seen a steady decline in relative valuation.
That trend may now be turning. A recent upward spike shows a breakout of the downward trend, and points at a change in market sentiment towards UK stocks.
Market recap
Bond yields spike: Fiscal concerns over debt sustainability drove Treasury and Gilt yields higher. The 30-year US Treasury yield hit 5.13% - its highest level since 2007.
US market loses momentum: The S&P 500 fell back after a 6-day winning streak, due to mounting concerns over fiscal policy, rising bond yields, and inflation. Further weakening of the US dollar exacerbated losses for UK investors.
Hang Seng picks up pace: Hong Kong-listed shares rose for the sixth consecutive week, fuelled by a surge in initial public offerings (IPOs). Over $6.5bn was raised for new offerings this week, with Jiangsu Hengrui Pharmaceuticals and Mirxes Holdings making particularly strong debuts.
Oil slips: US oil inventories rose by a surprise 1.3 million barrels last week, with weak demand putting downward pressure on prices. Reports that OPEC+ may increase output by 411,000 barrels per day in July have also weighed on sentiment.
Gold shines: A combination of stagflation concerns and fears over the sustainability of US debt drove gold higher this week, heading for its biggest weekly gain in over a month.
| | Weekly Change | YtD Change |
|---|---|---|
| FTSE 100 | 0.67% | 8.90% |
| FTSE 250 | -0.74% | 2.36% |
| S&P 500 | -3.10% | -6.99% |
| NASDAQ | -2.63% | -6.10% |
| MSCI Europe ex UK | 0.13% | 12.94% |
| Hang Seng | 0.61% | 11.37% |
| Nikkei 225 | -1.71% | -4.83% |
| Brent Crude | -3.03% | -20.19% |
| Gold Spot | 1.89% | 18.02% |
| UK 10yr Gilt yield | +11bps | +18bps |
| US 10yr Treasury yield | +9bps | -4bps |
Source: FE FundInfo, goldprice.org, exchangerates.org.uk, investing.com and finance.yahoo.com. GBP returns as at close of business on Thursday 22nd May 2025.
Stay tuned for next week’s market insights
For more market updates sign up to our CPD-accredited Let's Talk Markets webinars.
This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity. Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.
