Close, but No MOU

For the week ending 29 May 2026

As of midday Friday, global equities traded near record highs amid hopes for an agreement to end the war in Iran and reopen the Strait of Hormuz. The yield on the US 10-year Treasury note fell 14 basis points from a week ago to 4.44%, while the price of a barrel of West Texas Intermediate crude oil declined $10 to $87.75. Volatility, as measured by futures contracts on the Cboe Volatility Index (VIX), fell to 18.8 from 19.4.

MACRO NEWS

Preliminary US-Iran deal reportedly reached; Trump yet to sign off

Multiple media outlets reported Thursday that the US and Iran have agreed on a memorandum of understanding that would extend the ceasefire for 60 days to allow for negotiations over the fate of Iran’s nuclear program. Under the reported agreement, shipping through the Strait of Hormuz would be unrestricted, with no harassment or tolls. Iran is said to have agreed to removing all mines in the Strait within 30 days, while the US will lift its blockade in proportion to shipping flows through the Strait. The US would purportedly discuss sanctions relief for Iran, while Iran would commit to not pursuing a nuclear weapon. US President Donald Trump is said to have asked for a few days to think over the agreement.

On Friday, Al Arabiya reported that Iran wants to transfer its enriched uranium to China, provided the latter pledges not to turn it over to the US. Additionally, it said that Iran has agreed to international monitoring of its nuclear facilities.

Markets are hopeful that a deal will be reached, as evidenced by this week’s drop in crude oil prices and global bond yields and the continued rally in equities.

Q1 US GDP revised lower

The US economy grew more slowly than initially reported in Q1, the US Bureau of Economic Analysis reported Thursday, as the annual growth rate was lowered to 1.6% from the initial 2% reading. Lower inventories and increased imports were responsible for much of the downward revision. Final sales to private domestic purchasers, which reflect core domestic demand, were solid at 2.4%, a 0.1% downward revision. Finally, the data showed that corporate profits increased 3.3% from the prior quarter and were up 17% from a year ago, the largest year-over-year change since the final quarter of 2021. Also released Thursday, core PCE inflation rose 0.2% in April from the month before and 3.3% year over year. Durable goods orders, led by orders for commercial aircraft, jumped 7.9% in April though nondefense capital goods orders excluding planes dropped 1.1%.

QUICK HITS

Amid a global surge in AI infrastructure spending, Taiwan’s stock market overtook India’s as the world’s fifth largest by market capitalization.

The Financial Times reported this week that Spain, France, Italy, and the Netherlands are calling for tougher trade measures to defend European industry against proliferation of unfair trade practices and exports from China.

Analysts at Goldman Sachs this week raised their S&P 500 target to 8,000 from 7,600 and raised its EPS target to $340 (+24% year over year) in 2026 and $385 (+13%) in 2027. Fundamentally, earnings strength has been the key differentiator between the recent market run and similar narrow rallies in the past, they said. The firm also expects business investment in the US to grow 7.8% in 2026, up from an earlier forecast of 6.5%, driven by strong AI demand and provisions of the OBBBA.

The office of the US Trade Representative said the US will maintain tariffs on Mexico and Canada while negotiating the USMCA overhaul. Talks with Mexico are scheduled for May 28 and 29.

Nikkei reported this week that AI-related shortages have extended beyond GPUs and memory to include optical communications equipment.

New York Fed President John Williams said this week that the US labor market is “pretty balanced,” but that supply chain disruptions are a worry. Williams characterized the Fed’s policy stance as “slightly restrictive.”

Canada’s economy unexpectedly shrank at an annual rate of 0.1% in Q1, dramatically undershooting the +1.5% consensus forecast. Q4 growth was revised down to -1.0% from -0.6%. Canadian growth has been negative in three out of the last four quarters.

Reuters reported Wednesday that European Union governments cleared legislation to remove import duties on many US goods, a move that should avert US threats of higher tariffs on ​EU cars and other products.

The Bank of Canada warned Tuesday that the country's labor market is undergoing a structural change, creating a "low-hire, low-fire" environment that makes it more difficult to conduct monetary policy.

British intelligence officials estimate that nearly 500,000 Russian troops have been killed since the outbreak of the war in Ukraine.

The Bank of Mexico lowered its 2026 GDP forecast to 1.1% from 1.6%, citing uncertainty from the renegotiation of the USMCA and the conflict in the Middle East.

US Trade Representative Jamieson Greer criticized a German draft law that would force American streaming services to invest in Germany’s film sector, calling the measures discriminatory and a violation of the EU’s trade deal with the US.

The S&P/Case-Shiller National Home Price Index rose 0.7% year over year in March.

The Conference Board’s Consumer Confidence Index fell to 93.1 in May from 93.8 in April.

On Thursday, the US Treasury Department announced the rollout of its Trump Accounts mobile app ahead of the launch of the new tax-advantaged savings vehicle for minors on July 4.

Canadian Prime Minister Mark Carney told the Economic Club of New York that his country has made specific proposals to the US on trade, focused on aluminum, auto manufacturing, and critical minerals.

THE WEEK AHEAD

Monday: Global manufacturing PMIs

Tuesday: Eurozone CPI; US JOLTS

Wednesday: Global services PMIs; Fed’s Beige Book

Thursday: US unit labor costs/nonfarm productivity

Friday: Eurozone GDP; US and Canada employment reports

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Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research.