Now, remember: the US had been restricting chip sales to Saudi Arabia and the United Arab Emirates for national security reasons. So, this news came as a major relief for US chip companies, especially at a time when concerns about slowing demand from Big Tech have been mounting. Budgets from companies like Google and Meta are hard to match and even harder to replace — so the prospect of fresh orders from Saudi Arabia (and potentially the UAE) is excellent news for US chipmakers.

The market reaction was immediate. Nvidia jumped at the open, pushing above its 200-day moving average and gaining more than 5.5%. The stock is now up nearly 50% since the April dip. AMD extended gains above its 100-day moving average, breaking out of a six-month descending channel and topping the minor 23.6% Fibonacci retracement of last year’s decline.

Broadly speaking, AI demand remains strong, as more industries look to integrate AI into their operations. But recent trade uncertainty had forced some investment plans to pause — a dynamic that could have led to a temporary slowdown in AI-related activity. So the idea that Middle Eastern demand could offset that trend is excellent news on its own and should offer solid support for US chip stocks.

On the macro side, investors also digested the latest US inflation report — which showed prices rising last month, but less than expected on a monthly basis. On a yearly basis, the headline rate eased to 2.3% — the lowest since spring 2021 — marking the third straight month of a softer-than-expected print.

That’s good news for the Federal Reserve (Fed), but the reaction was muted. As the chief economist at Fitch warned, ‘core goods prices have yet to reflect the impact of the tariff hikes that have taken place since February,’ suggesting that many retailers are still selling from pre-tariff inventories. The added costs of new imports may only show up in data in the coming months.

As a result, expectations around the Fed didn’t shift much. The US 2-year yield hovered around the 4% mark, and markets continue to price in two rate cuts this year — with the first not expected before the September meeting.

Interestingly, even as easing trade tensions helped boost equity markets, the US dollar lagged. The dollar index gave back gains despite improving trade sentiment, while both the S&P 500 and Nasdaq extended their rebounds. The S&P 500 has now erased its year-to-date losses and is within 4% of its all-time high, while the Nasdaq has rallied more than 4,600 points since the April dip and sits just 1,000 points shy of its own record — reached in February. The rally is prompting analysts to improve their outlooks for US indices. Note that, the Dow Jones lagged due to an 18% slump in UnitedHealth Group after its CEO stepped down — a move that’s not reflective of the broader index.

Overall, US equity gains are accelerating on improved trade sentiment and a significantly better-than-expected earnings season. So far, S&P 500 companies have posted Q1 earnings growth of 13.1%, compared to just 6.6% expected before the season began. Gloomy earnings forecasts are being overlooked as better trade prospects and upside surprises continue to dominate investor focus. Citigroup’s earnings revision index even turned positive for the first time this year — another boost for sentiment despite hawkish Fed signals and rising yields.

Meanwhile, across the Atlantic, European indices are struggling to keep up — narrowing the performance gap between US and European markets.

April’s surprise jump in eurozone inflation has weakened the hands of European Central Bank (ECB) doves in recent weeks. At the same time, stalled trade negotiations with the US are weighing on sentiment — even more so as European leaders watch the US strike deals elsewhere. Scott Bessent warned this week that negotiations with the EU will likely take time, as European countries must agree internally before engaging with the US. The perception is that Europe is slipping back into its usual pattern: too cautious, too slow — and potentially risking the gains seen in the first four months of the year.

The EURUSD rebounded after touching its 50-day moving average, but sentiment on the euro has been downgraded from positive to neutral. A softer euro combined with rebounding energy prices could further soften expectations for ECB easing and keep a lid on European equity gains.

In the UK, some analysts reacted sharply to rising unemployment and softening wage growth, arguing that the Bank of England (BoE) is asleep at the wheel. Critics say the BoE should have acted more pre-emptively, especially in light of the tax hikes announced last October and ongoing trade tensions. Whether the BoE responds remains to be seen, but the softer data gave doves a boost — and helped sterling rebound past the 1.33 mark against a broadly weaker US dollar.

The euro, meanwhile, gave back all of its gains against the pound since early April, as hopes rise for new UK trade deals with big partners like India and the US — in contrast to the EU, where no new deals have yet been announced.