Good morning, Equities at All-Time Highs Despite the Strong UndercurrentWars are ongoing, inflation is elevated, and equities continue to climb, with major US benchmarks reaching all-time highs and the S&P 500 elbowing north of 7,500. About 300 names in the S&P 500 ended Thursday in positive territory, with 205 to the downside. More sectors also ended the day green than red, with technology (XLK) leading the way at 0.9%. The story here was largely Nvidia (NASDAQ:NVDA); the US clearing H200 chip sales to Chinese firms was the catalyst, sending the stock up 4.4% by the close of trade.Elevated Oil and Stalled DiplomacyOver in the Middle East, the picture remains opaque, with the Strait of Hormuz still largely impassable and diplomacy all but stalled. Reports of an Indian cargo vessel being sunk off Oman and a second ship seized near the UAE and steered toward Iran have kept oil prices elevated. Brent is finding support north of US$100/barrel.Speaking from Beijing, Trump stated that he is losing patience with Iran, and while US Admiral Brad Cooper noted that Tehran’s military capabilities have been degraded, vessels continue to be attacked! Despite the pleasantries, smiles and hyperbole, I feel the Trump-Xi summit lacked substance. 200 Boeing jets (well below what the market had anticipated), a couple of agricultural deals, and a new diplomatic phrase, ‘constructive strategic stability’ that Beijing leaned on heavily, were the highlights. Notably, though, Taiwan was the most controversial moment, with China issuing a warning. Semiconductors barely came up despite Jensen Huang being in the room. Trump and Xi publicly agreed that the Strait must remain open, and Trump claimed Xi had promised not to send Iran military equipment. That’s meaningful if it holds. But markets should note that Trump also said the US does not need the Strait open ‘at all’, which, of course, promptly sent oil higher.UK Politics: Burnham Steps Into the FrayManchester Mayor Andy Burnham has announced plans to return to Parliament, following MP Josh Simons’ announcement yesterday that he was stepping down, thereby opening a seat for Burnham to mount a direct leadership challenge against PM Keir Starmer. According to a YouGov survey, Burnham carries the only net positive approval rating of any senior Labour politician.In terms of market response, we have recently seen the GBP shed ground against its G10 peers, with losses most notable against the USD, CAD, and NOK. WTD, the GBP is down more than 2% versus the USD, on track for its largest one-week loss since late 2024. For GILTs, yesterday finished with yields running lower for a second consecutive session, though this morning’s open could depict a different story. A Burnham government is seen as a potential bearish play in bonds, with increased spending and, by extension, GILT issuance. You may also recall that he triggered a spike in government borrowing costs when he said Britain was ‘in hock’ with the bond market, though Burnham has since stated that this was taken out of context.Macro Front: UK GDP and US Retail SalesAway from geopolitics, the data slate saw the UK March GDP numbers land yesterday, and, apart from the Q1 26 print – which came in line with consensus – it was a relatively solid beat. Although this prompted a GBP bid, I was cautious. Not only was I tentative given the in-line QQ print, but the overall picture for the UK economy and the political situation is not the best right now, and if you look at the historical figures, it is not unusual for GDP to deliver an optimistic number in Q1, then gradually worsen throughout the year. This has been particularly evident since 2023, and – coupled with a heightened political state – is primarily why I believe the GBP upside response was lacklustre. Across the pond, the April US retail sales rose by 0.5% as widely expected, easing from a downwardly revised 1.6% reading in March. This lifted the April YY rate to 4.9%. What was interesting here is that, in spite of recent survey data indicating stressed consumers, it seems Americans continue to spend despite the inflationary impact of higher gas prices, which jumped nearly 3%. However, looking at the numbers, this was offset by reduced consumption in furniture (-2.0%), autos (-0.4%), and apparel (-1.5%). Nevertheless, rising fuel prices tend to take a few months to filter through before weighing on consumption, so if energy prices remain elevated, we can expect a different picture in the second half of the year, I believe. Also in the US, jobless claims for the week ending 9 May came in slightly higher than expected at 211,000, versus a downwardly revised 199,000 reading in the prior week. Personally, there is not really much to add here, other than it reinforces the low-hire, low-fire mode we are in right now. The calendar is light today. The market’s attention will remain squarely on geopolitics for now, while next week’s docket welcomes Fed minutes and a raft of UK data.