Market Summary - May 27, 2026

Author: Kathleen Brooks, Research Director UK

The financial markets are experiencing a notable shift as UK Gilts remain resilient despite a rising energy price cap, while US stocks are reaching new record highs. The S&P 500 has achieved another milestone, and Micron Technology has reached a valuation of $1 trillion, reflecting a renewed interest in technology stocks, particularly those linked to artificial intelligence (AI).

US Stock Market Performance

On a robust Tuesday session, US stocks surged, with the S&P 500 hitting record highs. This momentum has extended to Asia, where South Korean chipmaker SK Hynix also crossed the $1 trillion valuation mark. The ongoing enthusiasm for AI-related stocks is evident, especially with hopes for a resolution to the US-Iran conflict, which has been a source of market uncertainty.

Impact of Oil Prices

Despite the geopolitical tensions, oil prices have seen a decline of 2%, with Brent crude falling below $94 per barrel. This drop in oil prices has contributed to a positive market sentiment, leading to a decrease in bond yields across major economies. The UK 10-year yield has decreased by 4 basis points today and has fallen significantly since its peak earlier in May.

Energy Price Cap and Economic Outlook

In the UK, the energy price cap is set to rise by 13% in July, marking the highest increase in over two years. This rise translates to an additional £221 per household. However, the bond market's reaction has been muted for several reasons:

• The increase in the price cap is not as steep as in 2022, partly due to the growing use of renewable energy.
• Potential peace negotiations in the Middle East could lead to further declines in energy prices.
• Although the price cap may exert upward pressure on inflation, the overall economic indicators suggest a weakening UK economy.

UK Gilts and Political Landscape

After a period of selling, UK Gilts are regaining interest, aided by a softer stance on fiscal policies from Labour leadership candidate Andy Burnham. Former Prime Minister Tony Blair has cautioned the Labour party against adopting extreme left policies, which he believes could harm their prospects in the next general election. If Blair's advice is heeded, it could enhance the attractiveness of Gilts.

European Market Trends

European stocks are generally up, although the UK's FTSE 100 index is lagging due to its lack of technology representation and the decline of major oil companies like Shell and BP. Positive earnings reports from UK retailers such as M&S and JD Sports have provided some support to the FTSE 100.

Looking Ahead

Market participants are keenly awaiting further developments from the Middle East to maintain the current positive sentiment. US index futures indicate a higher opening, and Goldman Sachs has raised its forecast for the S&P 500 to 8,000 for the year.