Strong jobs report lifts US equities
United States (US) equity markets closed higher on Friday, powered by a stronger‑than‑expected jobs report, ongoing artificial intelligence (AI) enthusiasm, and hopes for a Middle East peace deal. For the week, the Nasdaq 100 surged 5.5%, the S&P 500 rose 2.33% – marking its sixth straight weekly gain – while the Dow Jones added 114 points, or 0.23%.
The April jobs report delivered a solid beat, with non‑farm payrolls rising by 115,000 against expectations of around 62,000. The unemployment rate held steady at 4.3%. This reinforced the picture of a resilient US labour market, even as cracks continue to widen elsewhere.
The University of Michigan consumer sentiment index slipped to a fresh record low of 48.2, missing forecasts of 49.5. That underscores how sensitive households remain to price pressures – especially at the pump.
At this pace, consumer confidence is on a collision course with President Trump’s approval rating, which has languished in the low 40s to upper 30s across major polls. The parallel is telling: both metrics are being dragged down by the same cocktail of sticky inflation, elevated fuel costs, and grinding uncertainty from the Middle East conflict.
Middle East tensions deepen as China comes into focus
That provides a natural segue into the latest Middle East developments, where tensions have escalated again after President Trump described Iran’s response to the US peace proposal as ‘totally unacceptable’.
With President Trump under pressure to end the war to improve his approval rating before the mid‑terms, and the Islamic Revolutionary Guard Corps (IRGC) seemingly doing its best to prolong the conflict, things are not looking particularly good as the world continues to draw down its reserves.
That said, markets have reacted with composure this morning. US equity futures are opening slightly lower, West Texas Intermediate (WTI) crude oil has jumped around 4% to $98.40, and the safe‑haven US dollar is firmer.
All eyes are now on President Trump’s upcoming visit to China, where it is hoped he can persuade Beijing to exert greater influence over Iran – with the goal of reopening the Strait of Hormuz and ending the conflict.
Inflation and earnings in focus this week
Looking ahead, and beyond the ongoing Middle East drama, investors will focus on another week of first‑quarter (Q1) earnings from names like [shares:CSCO‑US|Cisco], [shares:BABA‑US|Alibaba], [shares:JD‑US|JD.com] and [shares:UA‑US|Under Armour], alongside the latest US inflation data, previewed below.
CPI
Date: Tuesday, 12 May at 10.30pm AEST
For March, headline consumer price index (CPI) rose 3.3% year‑on‑year (YoY), a sharp acceleration from February’s 2.4% and the highest reading in several months, driven largely by higher energy and shelter costs. Core CPI (excluding food and energy) increased 2.6% YoY, only modestly higher than the previous month’s 2.5%.
Tuesday night’s inflation update comes at a particularly sensitive time. At the late April Federal Open Market Committee (FOMC) meeting, the Federal Reserve (Fed) kept rates unchanged but delivered its most divided vote since 1992. While Governor Miran pushed for a cut, Presidents Hammack, Kashkari and Logan dissented hawkishly, preferring to drop the easing‑bias language from the statement. The removal of the ‘additional adjustments’ wording was seen by markets as a clear pivot toward neutrality, making future rate hikes as likely as cuts.
Markets will be watching closely for the impact of higher petrol prices stemming from the Middle East conflict. Consensus expects headline CPI to rise to 3.8% YoY, with core CPI climbing to 2.7%. A stronger‑than‑expected print would reinforce the hawkish tilt from the FOMC, while a softer outcome would help temper those concerns.
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