Fed Hawkish Hold, Nvidia $3.5 Trillion & China PMI Contracts
The Fed kept rates steady but signalled cuts are off the table — and maybe hikes are back on. Nvidia hit a new record. China's factories contracted for the second month running.
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Finance Explained Simply The Brief 3 things that moved markets this week · 4 min read |
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01 Fed Policy ↑ Hawkish Hold Fed Holds at 4.75–5.0% with Hawkish Signal — Dot Plot Now Shows Zero Cuts for 2026 The Federal Reserve held rates unchanged at 4.75–5.0%, as expected. What nobody expected: the updated “dot plot” of Fed officials’ rate projections shifted from two cuts in 2026 to zero, and ten of the nineteen FOMC members now see at least one rate hike before year-end. The 2-year Treasury yield jumped 14 basis points on the day. Markets had been pricing in 1.5 cuts by December; those bets were rapidly unwound. What changed in the statement: The Fed dropped the phrase “restrictive stance” and added that “additional firming may be appropriate.” In central bank language, that is a direct warning shot. | |
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02 Tech/AI ↑ Record Nvidia Reaches $3.5 Trillion Market Cap — More Valuable Than Every European Stock Market Combined Nvidia closed the week with a market capitalisation of approximately $3.5 trillion after another blowout earnings report: Q1 revenue hit $44 billion, up 69% year-on-year, with net margins above 55%. The stock has now more than tripled since January 2025. Microsoft is the only other company above $3 trillion. Together, Nvidia and Microsoft represent roughly 15% of the entire S&P 500 index. Context: The entire FTSE 100 is worth approximately $2.2 trillion. A single American chipmaker is now 60% more valuable than every blue-chip company listed in London combined.
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03 China ↓ Weakening China’s Factory Activity Contracts Again — PMI Falls to 48.8 as Trade War Bites China’s official manufacturing PMI fell to 48.8 in May — below the 50 level that separates expansion from contraction. New export orders hit a 14-month low as US tariffs of 30–50% on Chinese goods continue to bite. The property sector remains in deep distress: home prices fell for a 24th consecutive month. Meanwhile, domestic consumer spending is depressed by deflationary psychology — consumers delaying purchases expecting prices to fall further. Global ripple: A weak China means weaker commodity demand, which is deflationary for raw materials — a partial offset to the inflation pressures in the US and UK.
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