U.S. stock markets continued to rise over the last week as investors digested a flurry of economic data and earnings reports, seemingly relieved to be dealing with data rather than tweets. The hard, but mainly backward looking, data was generally positive, especially around recent earnings and the U.S. job market. However, the trajectory of the economy continued to weigh on sentiment according to soft data as well as high frequency measures of economic activity such as shipping data.

Markets ended last week on an optimistic note, with reports that China was open to re-engaging in trade talks with the U.S. The Wall Street Journal also reported that Beijing had approached the U.S. to discuss issues around fentanyl precursors, which was the justification for a portion of the recently imposed tariffs on Chinese goods. This fueled hopes that the two sides could make progress in de-escalating trade tensions. The Taiwan dollar also surged on speculation that a U.S.-Taiwan trade deal could include demands for currency appreciation.

However, President Trump's noncommittal remarks over the weekend tempered optimism. In an NBC interview, Trump suggested trade deals could be announced within weeks but emphasised he would be the one ultimately setting the terms. Markets pulled back on the continued uncertainty.

On the economic front, the April U.S. jobs report beat expectations, with 177,000 new jobs created across most sectors (excluding farming and a few others), beating expectations and pointing to continued resilience in the labour market. The unemployment rate held steady at a low 4.2%. While this reduced market expectations for imminent Fed rate cuts, many still see cuts as likely in the second half of the year as the impact of tariffs flows through. The ISM services index (U.S. services sector measure) also topped forecasts, rising to 51.6 from 50.8, though this only partially reversed the prior month's steep drop.

Corporate earnings remained a bright spot, with 72% of S&P 500 companies beating EPS estimates so far for Q1. Earnings growth is tracking at a robust 12.8% year-over-year. Meta Platforms (Facebook) shares jumped after reporting strong advertising growth and user engagement metrics. Looking ahead, more companies are warning of weaker profits next quarter — with 35 issuing negative guidance, compared to just 26 expecting stronger results. The consumer and cyclical sectors are seeing more mixed results compared to technology.

Elsewhere, crude oil prices continued their slide, falling to the lowest level since early 2021 as OPEC countries moved forward with previously announced production increases, even as the demand outlook clouds over. Lower energy prices could act as a partial offset to tariff-driven inflation in the U.S.

In summary, there were some encouraging economic and earnings developments. But markets remain vulnerable to shifting trade winds as the U.S. and its major trading partners continue to negotiate new terms of engagement. Much depends on whether the U.S. economy can maintain its momentum in the face of persistently high uncertainty. While a "soft landing" can't be ruled out, risks of a sharper slowdown will stay elevated until more clarity emerges on the post-tariff economic landscape.