Nasdaq Slides as Oil Holds Above $100 Before China Talks

Summary

The Nasdaq Composite closed lower on Tuesday as stronger US inflation data reduced expectations for Federal Reserve rate cuts and lifted Treasury yields. Oil prices remained above $100 per barrel ahead of Donald Trump’s meeting with Xi Jinping in Beijing, while the US dollar held near a one-week high against sterling and the euro. Zebra Technologies jumped after raising its annual sales forecast, while Hims & Hers Health fell sharply following disappointing quarterly results. The FTSE 100 ended flat after recovering from earlier losses linked to UK political uncertainty and higher borrowing costs.

Equities

The FTSE 100 closed flat at 10,265.32 on Tuesday after recovering from an earlier fall of more than 1%, as investors weighed political uncertainty in the UK alongside renewed inflation concerns linked to the conflict in the Middle East. The more domestically focused FTSE 250 fell 1.5%, marking its sharpest one-day decline in more than six weeks, while the pound weakened against the dollar and long-term UK borrowing costs climbed to their highest level in nearly 30 years.

Banking shares led the declines in London trading on Tuesday. Barclays closed 3.3% lower, while Metro Bank dropped 5.6% as investors reacted to concerns that any future change in UK political leadership could lead to increased public spending and further pressure on government finances. Rate-sensitive property shares also came under pressure, with the broader UK real estate sector falling 3.1%.

Oil and gas companies moved higher as crude prices rose sharply following comments from US President Donald Trump that the ceasefire with Iran was “on life support”. UK-listed energy shares gained 1.1% during Tuesday’s session as Brent crude futures climbed roughly 3%. Defensive sectors including healthcare, food and beverage producers, and personal care stocks also finished higher and helped stabilise the FTSE 100 late in the day.

In the US, the S&P 500 closed 0.16% lower at 7,400.96, while the Nasdaq Composite fell 0.71% as technology shares weakened after inflation data came in above expectations. The Dow Jones Industrial Average edged 0.11% higher, supported by gains in healthcare stocks.

Humana jumped 7.7% after Bernstein raised its price target by 36%, while Zebra Technologies surged 11.4% after increasing its annual sales growth forecast on stronger demand for manufacturing automation products. Hims & Hers Health fell 14.1% after reporting weaker-than-expected first-quarter revenue and a surprise loss, while GameStop closed 3.5% lower after eBay rejected its proposed $56 billion takeover approach.

Forex & Commodities

The US dollar held close to a one-week high early on Wednesday after stronger-than-expected US inflation data pushed Treasury yields higher and reinforced expectations that the Federal Reserve could keep interest rates elevated for longer. The dollar index traded near 98.33, while the euro weakened to $1.174 and sterling edged lower to $1.353 against the greenback.

The Japanese yen traded around 157.7 per dollar after a sharp move stronger on Tuesday prompted speculation that Japanese authorities may have carried out a rate check ahead of potential currency intervention. US Treasury Secretary Scott Bessent said the US and Japan agreed that excessive currency volatility was undesirable, comments that provided some support for the yen. China’s yuan held near 6.790 per dollar, close to its strongest level since early 2023.

The latest US inflation figures showed consumer prices rose 3.8% year-on-year in April, marking the strongest annual increase since May 2023. The data led markets to further scale back expectations for a Federal Reserve rate cut this year, while traders increased bets on a possible quarter-point rate rise by December. Yields on the US two-year Treasury note traded near 3.990, while the 10-year yield remained close to 4.463.

Spot gold slipped early on Wednesday to $4,710 per ounce after inflation data reduced expectations of lower US interest rates. Investors also focused on upcoming US producer price data and this week’s meeting in Beijing between President Donald Trump and Chinese President Xi Jinping. In India, gold and silver prices moved sharply higher after the government raised import tariffs on precious metals to 15% from 6%.

Oil prices eased after a three-day rally, although both major benchmarks remained above $100 per barrel. Brent crude traded near $106.3 per barrel, while US WTI crude stood around $100.8. Prices stayed elevated as concerns persisted over disruption to energy supplies through the Strait of Hormuz following renewed tensions between the US and Iran.