The Cambridge Weekly – 11 May

Samsung became only the second Asian company to surpass the $1 trillion dollar market capitalisation mark last week. Shares in the technology giant made progress last week, driven by optimism from the White House over a potential resolution to the Middle East conflict. The firm had already reported stellar results at the end of April, highlighting a 49-fold increase in profit from memory chips. South Korea’s KOSPI index closed at a record high, lifting its year-to-date gains above 75%, following a 76% rise in 2025. The rally has been led by Samsung and SK Hynix, which together make up more than 40% of the index and are both up over 100% so far this year.

US Equity Market:
Competition in the AI space has been heating up in recent weeks as Anthropic – known best for its Claude chatbot – are looking at a new round of funding that would value the start-up at over $900bn. Anthropic has narrowed the gap with its main rival OpenAI, and has recently secured an impressive $65bn in funding from Google and Amazon. Many people are worried that Anthropic’s latest model – Claude Mythos – is so powerful that it poses a huge security risk if misused by the wrong person. For this reason, Anthropic is limiting the use of Mythos in the hope that cybersecurity companies will be able to catch up.

US fuel exports reached record highs recently as the US has met some of the surplus demand from China and Europe, which would have historically been met by the Middle East. Figures from the US Energy Information Administration reveal that more than 8.2m barrels per day were shipped last week, a 20% rise from the same period last year.

UK Equity Market:
Last week was a mixed week for two UK banking and energy giants. HSBC announced last Tuesday that profits had dropped by $100 million to $9.4 billion relative to the first quarter of 2025. This loss was attributed to potential losses on bad loans jumping to $1.3 billion, $300 million of which is linked to the ongoing impact of the Middle East conflict. Shares fell more than 7% on the day.

On the flip side, last Thursday Shell reported that adjusted profits had jumped to $6.9 billion in the wake of the conflict over Q1, up from $6.4 billion in the first three months of 2025. Despite this, shares were down 2.4% in early trading, with the company guiding cautiously. It warned that gas production had actually dipped across the quarter, a sign of the damage inflicted on energy facilities across the Gulf and would decline at least a further 30% in Q2.

UK local elections took place on Thursday and, with 30-year gilt yields looking especially gloomy, they have landed at an awkward time for the Labour party. Labour suffered significant seat losses in historic strongholds, which threatens to apply further pressure to party leadership and potentially push the cost of government borrowing higher still. On a more positive note, dividends from UK companies jumped sharply in Q1 – to their highest first quarter figure since 2021. Total payouts rose 21.1% to £16.4 billion against Q1 2025 and paint a more promising economic picture than gilt markets would suggest. The FTSE 100 closed last week to Friday down 1.2%.

Inflation, Interest Rates and Bond Markets:
The 30-year gilt yield rose above 5.8% in trading last Tuesday – the highest level since 1998 and 60bps up from the end of February – driven by the energyled inflation shock in the Middle East, and political uncertainty ahead of the May local elections. Both these events have catalysed a dramatic shift in interest rate expectations in recent months, with neither appearing to offer any respite for investors. Rising debt servicing costs and stagflation worries have added further pressure, leaving gilts the worst performing major bond market during the conflict.

In line with broader market volatility, credit spreads for both UK and US investment grade bonds widened over March. However, this modest widening has since reversed in tandem with equity market rallies, as investor sentiment for a peaceful resolution in the Middle East improved. At the time of writing, credit spreads are now broadly in line with pre-conflict levels and back to near-historical tights. As a reminder, the credit spread of a corporate bond reflects the additional risk priced in by investors for holding the corporate over the equivalent dated government bond.

What’s on the horizon
As ever, the near-term focus for investors will be developments in diplomatic negotiations in the Middle East.

Elsewhere, this week brings multiple key inflation and growth releases across major economies. In China and the US, CPI data will be released  today and tomorrow respectively. This will provide an insight into conflict driven domestic price pressures, and may provide a signal for future monetary policy decisions in the world’s largest economies.

Attention will then turn to the UK, with the preliminary GDP estimate due on Thursday. This will offer a timely read into the strength of economic activity given ongoing investor concerns. The week concludes with US economic data on Friday which will include both jobless claims and retail sales.

This material has been written on behalf of Cambridge Investments Ltd and is for information purposes only and must not be considered as financial advice. We always recommend you seek financial advice before making any financial decision.

Past performance is not a guide to future performance.

The value of your investments can go down as well as up and you may get back less than you originally invested.

Source of financial market data: MorningstarDirect.