In the United States, markets were mixed last week, with corporate earnings, artificial intelligence and geopolitics all contributing to a volatile environment. Domestically, some calm returned after another full-scale government shutdown was averted, with President Trump signing legislation to reopen parts of the federal government where funding had lapsed over the previous weekend. Market movements, however, were primarily driven by a sell-off in large-cap technology stocks, with software companies feeling the greatest impact amid growing concerns over the long-term viability of certain software models in the face of rapid advances in AI. For the week, the S&P 500 and the NASDAQ closed -0.16% and -1.78% lower, respectively.
In earnings news, it was another busy week, with major corporates on both sides of the Atlantic reporting results. In the US, key names included Palantir, Alphabet and Amazon. Palantir reported strong earnings, with revenues growing by 70%, driven by surging demand for its AI products, particularly from US government agencies, where revenues increased by 66%. Alphabet, the parent company of Google, also reported results that exceeded expectations and announced plans to nearly double investment in AI data centre capital expenditure to between $175bn and $185bn, well ahead of market estimates of approximately $120bn. Despite the earnings beat, shares declined modestly as investors continued to assess whether the higher level of investment would ultimately generate stronger returns. Amazon, meanwhile, saw shares fall by 12% after announcing $200bn in AI-related capital expenditure, underscoring broader concerns around escalating spending across the sector – which could limit dividend potential and pressure profitability.
In corporate developments, the largest M&A transaction on record was announced last week, when SpaceX, the space exploration company founded by Elon Musk, acquired xAI, also founded by Musk. The transaction combines two of the world’s largest private companies and values SpaceX at approximately $1tn, with xAI valued at around $250bn. Another significant development, which had a notable impact on the software sector, was the announcement of new AI tools by Anthropic, as part of its Claude AI agent. These tools are designed to automate tasks across areas such as legal services, sales, marketing and data analysis. The announcement raised concerns around the resilience of traditional software-as-a-service (SaaS) business models amid accelerating AI disruption. Shares in Thomson Reuters, Wolters Kluwer and RELX all declined by more than 10% on Tuesday alone. Finally, amid ongoing volatility in the technology and software sectors, Walmart became the first retail company in history to reach a $1tn market capitalisation. Walmart’s shares have risen by more than 26% over the past year, reflecting its ability to attract consumers across both ends of the income spectrum.
In Europe, equity markets began the week strongly, with both benchmark indices reaching record highs on Monday and Tuesday. This was driven by risk-on buying, despite a sell-off in precious metals that briefly spilled over into equities. However, markets pulled back later in the week as corporate earnings failed to impress. A sharp decline in Novo Nordisk was followed by weaker performances from Shell, BBVA and Rheinmetall, all of which missed earnings expectations. For the week, the Euro Stoxx 50 and the STOXX Europe 600 closed 1.75% and 1.67% higher, respectively.
In earnings news, it was a busy week for European companies, with several of the bloc’s largest corporates reporting results. One of the most notable was Novo Nordisk, the company behind the weight-loss drug Ozempic. While both earnings and revenues exceeded forecasts, this was overshadowed by guidance indicating that sales and profit growth would slow in 2026, largely due to lower drug prices in the US. Operating profit is now expected to decline by 13%, significantly worse than market expectations. However, while sales are forecast to weaken in the US, growth is expected to continue in markets outside the country. Elsewhere, major banks across the continent also reported results. Banco Santander posted record quarterly profits and announced an increase in its customer base of eight million people. The bank also stated that its full-year 2025 results were the strongest in its history, with profits of €14.1bn.
In the United Kingdom, the FTSE 100 traded higher last week, benefiting from its relatively low exposure to the technology and software sectors, which were heavily sold off. Gains among healthcare, defensive and oil stocks helped push the index to a new all-time high last Thursday, while the market reaction to the Bank of England’s interest rate decision was largely muted. For the week, the FTSE 100 closed 1.21% higher.
In corporate developments, Zurich Insurance Group agreed last week to acquire Beazley, the specialist insurance firm, for a reported £8bn, following several previous unsuccessful attempts to purchase the company.
