AI spending pushes global stocks to new highs: US tech companies have raised USD 159bn in the corporate bond market this year, while Google has just announced a USD 80bn stock offering to fund increased AI investment. Semiconductor and data centre infrastructure stocks continue to benefit, seeing higher earnings estimates.
But oil shortfall close to critical levels: as of 2 June, there is still no definitive US-Iran agreement, and the Strait of Hormuz remains closed. The world is running out of oil reserves, raising the risk of a further oil price spike as physical shortages emerge. Neutral on equities in the absence of a definitive agreement.
Reinforcing our Positive view on industrial metals: growing technology and defence demand plus Gulf supply disruption continue to support aluminium and copper prices. We retain a Positive view on European diversified miners and on industrial metals, at new year highs.
ECB and Bank of England to raise rates once in 2026: energy-related inflation pressures should convince the ECB and BoE to raise benchmark interest rates once each this year. In contrast, we see a stable Fed Funds rate over 2026. Modestly supportive for the euro.
Parabolic move in semis echoes dot-com bubble euphoria: the violent April-May surge in IT hardware stocks is reminiscent of the dot-com bubble, suggesting investor caution as parabolic moves can be followed by sharp market corrections, even in an ongoing bull market. Look to take at least partial profits on US, emerging market and tech sector exposure.
Edmund Shing
Chief Investment Officer
