The Week That Was

Global equities moved lower last week as investors became more cautious on the outlook for the US technology sector, the path of interest rates, and ongoing tensions in the Middle East. The S&P 500 declined by 2.6%, with investors taking profits following a nine-week winning streak and growing more cautious on the AI theme after large-scale equity issuance from Alphabet and weaker than expected results from Broadcom.

European equities proved more resilient, falling just 0.5%, supported by strong performance in the Energy sector as Brent crude rose to $93 over the week. Despite this, global commodities declined by 0.6% in euro terms, with gold erasing its year-to-date gains following a stronger than expected May jobs report, which came in at roughly double market expectations. This reduced expectations for Fed rate cuts this year and pushed the US 10-year yield back above the 4.5% level.

Summary Economic Releases

The Week Ahead

Asian markets moved lower this morning, reflecting renewed concerns over tech valuations and a re-escalation of tensions in the Middle East. Iran launched its first attack on Israel since the ceasefire began around 100 days ago, while the US administration maintained over the weekend that a deal to end the conflict remains close.

Brent crude futures nevertheless spiked to $97 a barrel, despite OPEC+ announcing its fourth consecutive increase in oil output. Elsewhere, data from Japan showed GDP growth of 1.8% in Q1, suggesting the economy is proving more resilient than previously anticipated.

From a corporate perspective, earnings releases remain light. However, results from Adobe and, in particular, Oracle will attract added attention given last week’s tech-driven sell-off. Solid results are expected from the leading cloud infrastructure provider, reflecting a strong breadth of demand across its database and applications. The market will be keen to get a sense of evolving demand trends, along with any insights on its key customer OpenAI, which has announced an overhaul of ChatGPT ahead of an IPO later this year. SpaceX is set to list on the Nasdaq on Friday, which should represent the largest IPO ever. However, its small free float will mean it will have limited impact at an index level.

It will also be a big week for Apple, which hosts its Worldwide Developer Conference, where it is set to unveil greater details on its Gemini-powered Siri chatbot along with its broader AI strategy, which could provide a catalyst for the stock. The week will also see Grafton Group hold a Capital Markets Day, which will likely focus on geographical growth opportunities, mainly in Ireland and Spain, with the group remaining focused on developing a robust value chain.

From an economic perspective, industrial production in Germany is expected to turn positive for the first time in three months, adding to a mixed economic picture for Europe’s largest economy. On Wednesday, US headline inflation for the month of May is set to climb to 4.2% on rising petrol prices. However, with the monthly pace of the core reading tracking in line with the Fed’s target, a rate cut before year end cannot be ruled out. On Thursday, the ECB is widely expected to hike rates by 25bps, with the focus set to centre on updated staff projections and President Lagarde’s commentary on the prospects of additional hikes in the face of a softer macro backdrop.

On Friday, US Michigan consumer confidence is set to fall to a fresh record low due to elevated inflation, while Switzerland is expected to reject the implementation of a population cap when it goes to public vote.

Opportunities this week:

• Ryanair Holdings (Overweight PT €30.50, 29% upside) – News update and reiteration of rating
• Flutter (Overweight PT $182, 80% upside) – Update on recent event and news flow, with PT revised down
• Supermarket Income REIT (Overweight PT 90c, +16.4% upside) – Restating positive investment case

This is an extract from the Weekly Markets Report by Cantor Fitzgerald Ireland. For more detail on individual securities, or to discuss how we can support your investment needs, please get in touch.