Growth Resilience Drives Equity Rotation as Energy Weakness Eases Inflation Pressure | Weekly Recap: 04 - 08 May 2026

Markets moved toward a more constructive tone last week, as resilient growth and moderating inflation supported a gradual rotation back into risk assets.

Economic Overview

Markets spent the week reassessing the balance between slowing inflation and still-resilient growth, increasingly leaning toward a soft-landing narrative rather than an imminent downturn.

The shift was not driven by a sharp improvement in data, but by growing confidence that major economies are slowing gradually, not collapsing.

In the US, labour-market data remained central. Job openings held near 6.9 million, while Non-Farm Payrolls showed +115,000 jobs added, with unemployment steady around 4.3%. Wage growth moderated only slightly.

The implication was clear:

👉 Demand remains strong enough to support growth

👉 But not strong enough to force tighter policy

The ISM Services PMI also stabilised, reinforcing resilience in domestic demand despite restrictive conditions.

Outside the US, policy divergence remained in focus. The RBA raised rates to 4.35%, signalling that inflation risks remain a priority for some central banks.

Across Europe and the UK, growth remained softer, limiting upside in regional markets.

In Asia, Japan benefited from improved sentiment and a weaker yen, while China’s recovery remained uneven, particularly across domestic demand.

Overall, markets increasingly priced moderation, not deterioration.

Markets Overview

Equities

Global equities moved higher, with leadership concentrated in growth sectors and US markets.

The S&P 500 rose ~2.4%, while the Nasdaq gained ~3.5%, driven by continued demand for technology and AI-linked exposure.

European markets participated but lagged, while Asia was more mixed, with Japan outperforming and China trailing.

Bonds

Bond markets reflected improving confidence in the soft-landing narrative.

The US 10-year yield eased from ~4.45% to ~4.36%, while the 2-year also moved lower, signalling reduced pressure on policy expectations.

European yields followed a similar pattern.

Commodities

Commodities diverged. Brent crude briefly moved above $114 before softening into the end of the week as demand expectations cooled and risk premia eased.

Gold traded unevenly near $4,500, initially weakening on higher real yields before stabilising.

Overall, cross-asset performance reflected growing comfort with slower, but still positive growth.

Sector Insights

Sector performance reflected a clear rotation back toward growth and cyclical exposure as easing yields and resilient data supported risk appetite.

Top Performers

• Information Technology & Communication Services +6.26%: Led gains as lower yields supported growth valuations and AI-driven demand remained strong.
• Consumer Discretionary +1.75%: Benefited from improving confidence in consumer resilience.
• Industrials +1.38%: Reflected stabilising growth expectations.
• Financials +0.10%: Modest gains as elevated yields supported margins but capped upside.

Laggards

• Energy -5.79%: The weakest sector as oil prices softened into the end of the week.
• Utilities -2.75%: Declined as investors rotated away from defensive, yield-sensitive sectors.
• Health Care -1.34%: Lagged as demand for defensives eased.
• Consumer Staples -0.08%: Flat performance in a more risk-on environment.

Sector Performance May 4th – May 8th

Regional Insights

Regional performance reflected a clear divergence, with markets benefiting most where growth visibility and sector support remained strongest.

• MSCI Japan +3.11%: Strongest performer, supported by yen weakness and export-driven sectors.
• MSCI North America +2.51%: Continued leadership driven by US resilience and technology strength.
• MSCI China +1.94%: Recovered modestly as sentiment improved, though domestic demand concerns remain.
• MSCI Europe +1.84%: Gains lagged stronger regions amid ongoing growth concerns.
• MSCI United Kingdom -0.83%: The only declining region, weighed down by energy sector exposure.

The regional pattern highlights continued capital concentration in markets with stronger growth visibility, particularly the US and Japan.

Regional Performance May 4th – May 8th

Currency Markets

FX markets reflected a moderate unwind of defensive dollar positioning.

• EUR/USD: Strengthened ~0.7%, supported by stabilising sentiment and softer USD.
• GBP/USD: Rose ~1.5%, helped by improving risk appetite and firmer UK expectations.
• USD/JPY: Fell ~1.5%, as yields eased and the yen recovered modestly.

Commodity currencies remained volatile, with the AUD reacting to the RBA hike and CAD pressured by softer oil prices.

Overall, FX moves aligned with improving risk sentiment and easing inflation pressure.

Looking Ahead

The key focus now is whether inflation continues to moderate enough to allow central banks greater flexibility later in the year.

Upcoming inflation data, labour-market releases, and central bank communication will remain the primary drivers of market direction.

Oil also remains critical, any renewed strength could quickly reintroduce inflation concerns.

For now, markets continue to interpret weaker data as moderation, not contraction.

👉 The key question:

Is this the start of a sustained recovery, or simply a more stable phase within a still-fragile environment?