Markets Are Leaping From Bubble To Bubble; Just Don’t Look Down!

本站添加: 2026-06-01

[00:00:00]Today, markets are leaping from bubble to bubble.

[00:00:03]Just don't look down.

[00:00:16]Hello again, this is Martin North from Digital Finance Analytics. Well, that is post covering finance and probably news.

[00:00:20]This is our weekly market update where we start in the US, cross to Europe and Asia, and end in Australia. And we cover bonds and crypto along the way.

[00:00:28]Financial markets have become little more than a series of bubbles with investors jumping from one to the next.

[00:00:35]We had a bubble in software which morphed into the big five or the fang bubble, which then became the magnificent seven bubble, which has given way in turn to the bubble in computer chip and memory stocks that has recently sent the Wall Street indices to fresh record highs. In fact, the Shiller PE ratio is close to where it reached in the year 2000 peak before the dot-com bubble went pop. It's currently at 42.55.

[00:01:06]Just don't look down. Markets were also buoyed by reports that the US and Iran have reached a deal to extend their ceasefire and remove restrictions on vessels crossing the Strait of Hormuz.

[00:01:18]President Donald Trump met with his officials to make a final determination on the deal, but so far no clear signal, just more noise. As Tehran earlier said it was looking for action, not words, when it came to an agreement. Meantime, the shortages are building as strategic reserves are raided. Who will blink first? Clearly, there is continued uncertainty about negotiations even as both sides have signaled some progress towards extending a ceasefire that has largely held since April, though there have been some skirmishes recently. The International Energy Agency, the International Monetary Fund, the World Bank, and the World Trade Organizations have all warned that continuous disruptions to shipping flows through the Strait of Hormuz could increase risks to fuel security, market conditions, and broader economic resilience.

[00:02:10]And we continue to see the fallout from higher inflation with rate cuts all but off the table and the suspicion of higher rates for longer.

[00:02:19]Shares are frankly fully valued or perhaps overvalued because while the tech sector is managing to lift their results, other sectors are lagging.

[00:02:29]Nevertheless, the MSCI Global Index was up another 1.6% for the week and up 0.5% on Friday alone and up 4.7% for the month. The European STOXX 600 was up 0.1% for the week and on Friday but was up 2.4% for May, while the Asian markets excluding Japan Index was up another 4.4% for the week and 8.1% for the month.

[00:02:54]The ASX 200 in Australia climbed 1.6% recovering from Thursday's 1.4% sell-off, which was triggered by renewed US military strikes on Iran. The benchmark finished the week 0.9% higher and has risen 0.8% across May.

[00:03:10]And Wall Street's main indices hit record closing highs on Friday and posted weekly and monthly gains as Dell results drove tech shares higher while investors awaited details on that potential US-Iran deal.

[00:03:24]The Dow Jones Industrial Average rose 0.7%. The S&P 500 gained 0.22%.

[00:03:29]The Nasdaq Composite gained 0.21%.

[00:03:32]The small-cap Russell 2000 Index was down though, 0.6% for the week. The S&P 500 gained 1.43%.

[00:03:41]The Nasdaq rose 2.4% and the Dow climbed nearly 0.9%.

[00:03:46]The Russell 2000 rose 1.7% and the S&P 500 rose its ninth consecutive weekly gain. That's the longest winning streak since December 2023. For the month, since April the 30th, the S&P 500 gained 5.1%. The Nasdaq rose 8.4% and the Dow climbed 2.8% and the Russell 2000 rose 4.2%.

[00:04:09]Dell surged 32.8% after raising its full-year profit and revenue forecasts on Thursday. The tech sector climbed 1.87% fueled by gains in chip stocks.

[00:04:20]Peers Hewlett Packard Enterprise and Super Micro Computer gained 12.6 and 11.6% respectively. The software services index also advanced by over 6% erasing all the losses since January when concerns over AI disruption had weighed on the sector.

[00:04:39]Microsoft rose 3.6% and Broadcom rose 2.4%. Big technology stocks have been behind much of the market's record-breaking streak. Their pricey stock values give them more influence in directing the markets higher or lower.

[00:04:55]In May alone, technology stocks with the S&P 500 rose more than 15% while most of the sectors in the benchmark index actually lost ground.

[00:05:05]Consumer staple shares were weak though with heavyweights Costco and Walmart down 3.9 and 2.6% respectively. And the S&P automaker index dropped after reports the Trump administration wants North American built vehicles to have 82% regional content to qualify for preferential treatment under the US, Mexico, Canada agreement.

[00:05:28]Shares of General Motors fell 1.3% and US listed shares of Stellantis dropped 2.7%.

[00:05:35]Markets reacted to the twists and turns as the US and Iran were reportedly working towards a deal to extend a ceasefire that eased pressure on oil prices with the price for August delivery of Brent crude, the international standard, falling 1.7% to settle at $91.59 a barrel. But, it's still well above the $70 US dollars a barrel of late February before the war began.

[00:06:04]The price for a barrel of the benchmark US crude oil for July delivery fell 1.7% to settle at $87.36.

[00:06:14]And natural gas futures are still 63% higher than a year ago thanks to the blockages in the straits.

[00:06:20]Several reports this week reflected inflation's rise and the impact on consumers. A measure of inflation preferred by the Federal Reserve accelerated in April to its highest level in 3 years. The data showed that US consumer spending power was being dented as households reigned in expenditures to offset rising gasoline prices. Consumer confidence is slipping amid the squeeze from rising inflation while GDP for the first quarter was revised lower at 1.6% annual rise.

[00:06:50]The Fed's Kansas City President Jeffrey Schmidt warned the energy shock may not be temporary. And Vice Chair of Supervision Michelle Bowman said a persistent rise in inflation may require tighter monetary policy.

[00:07:05]Money markets expect the Federal Reserve to keep interest rates steady for the rest of the year with expectations of a 25 basis point hike in December.

[00:07:13]Wall Street's worries about rising inflation have been somewhat muted by the latest round of corporate half results though. Companies in the S&P 500 have reported profit growth of 28% overall for the most recent quarter according to FactSet.

[00:07:29]The overwhelming majority of companies in the S&P 500 have reported their latest results.

[00:07:34]That could mean investors focus could shift back towards inflation, consumer behavior, and the Fed's path ahead for interest rates now that the show is over.

[00:07:45]Treasury yields held relatively steady as oil prices fell. The yield on the 10-year Treasury was at 4.436% while the 2-year was at 4.002%.

[00:07:58]One analyst observed, "The AI story is helping to offset the negatives from the Iran war, the consequent oil price spike, and continued uncertainty over a resolution of the conflict. With each foray followed by a retreat, the markets have become increasingly numb to Trump's bellicose and grandiose statements. The markets hope that as the midterm approaches, the chances for a lasting ceasefire increase whether or not US goals have been achieved. Investors expect the AI infrastructure boom to continue to mask the negative impact of geopolitical disruptions. Stock markets care about company profits. As long as earnings grow, stock prices can continue to rise."

[00:08:45]The volatility index was down 2.54% to 15.32.

[00:08:51]That's a new 3-month low.

[00:08:54]Gold futures for August delivery was up just a little, 0.93% to $4,593 a troy ounce. The euro US dollar was at 1.1662 while the US dollar Japanese yen was at 159.26 and the US dollar index futures was at 98.94.

[00:09:16]European stocks traded around the flat line on Friday while oil prices dropped buoyed by those fresh news reports of progress in diplomatic efforts to end the Iran war. The pan-European Stoxx 600 rose 0.1%. The DAX in Germany gained 0.1% and the CAC 40 in France fell 0.1% while the FTSE in the UK declined 0.2%.

[00:09:38]New data showed that consumer prices in Germany rose by a smaller annualized pace in May, but then accelerated in Italy.

[00:09:46]Defense stocks were among the out performers, particularly after Romania, a member of the NATO alliance, said a drone strike injured two people overnight. Defense stocks can be boosted during times of geopolitical stress as investors hope for strong earnings derived from demand for military hardware and services.

[00:10:03]British stocks closed lower on Friday, reversing initial gains, while broader European markets were mixed as investors balanced cautious optimism over a possible US-Iran ceasefire extension against the prospect of another weekend of geopolitical uncertainty and a memorandum of understanding that remains well unsigned and frankly contested.

[00:10:25]Adding a domestic layer to the London session, Bank of England Governor Andrew Bailey said the Bank of England could tolerate inflation temporarily above its 2% target to support the UK's weak economy so long as second-round effects do not emerge.

[00:10:40]Markets may have sharply pared rate hike bets though through May with swaps now pricing just one quarter point increase by the end of the year versus three that were expected as recently as late April in the UK with the June 18 meeting now a key test.

[00:10:59]Asian stock markets rose sharply on Friday led by artificial intelligence-linked shares tracking Wall Street's record highs, while reports that the US and Iran were close to extending their ceasefire also boosted risk appetite.

[00:11:14]Asian technology shares took cues from Wall Street where the S&P 500 and the Nasdaq composite posted record closing highs overnight driven by strong gains in AI-linked companies.

[00:11:26]Japan's Nikkei 225 jumped nearly 3% to a fresh all-time high of 68,449 points, while the broader Topics Index rose 2%.

[00:11:36]Data showed Tokyo core inflation slowed to 1.3% in May, remaining below the Bank of Japan's 2% target and reinforcing expectations that the central bank will proceed cautiously with further policy normalization. But of course, that inflation rate is suppressed thanks to government intervention.

[00:11:54]The 10-year bond was down to 2.655%.

[00:11:58]Separate data showed that Japan's factory output rose 0.9% in April from the previous month, rebounding unexpectedly despite concerns over rising energy costs and supply chain disruptions linked to the Middle East tensions.

[00:12:11]Retail sales rose 2.1% in April from a year earlier, matching March's pace and topping market forecasts for 1.4% growth. But they continued to intervene in the foreign exchange markets to support the yen.

[00:12:24]South Korea's Kospi surged 3.4% to a new record high, powered by strong advances in semiconductor and AI-linked shares.

[00:12:33]Hong Kong's Hang Seng Index rose 1%, while China's Shanghai Composite edged down 0.4%, while the blue-chip Shanghai Shenzhen CSI 300 traded flat.

[00:12:43]Indian markets were weaker, with the Nifty 50 down another 1.5%.

[00:12:49]Australian shares posted a second consecutive monthly gain after the biggest rise in May on Friday as easing tensions in the Middle East lifted investors' appetite for risk and pushed all prices lower.

[00:13:01]The S&P/ASX 200 Index climbed 1.6% to 8,731.7, and the benchmark finished the week 0.9% higher, and those risen 0.8% across May.

[00:13:14]Materials were strongest, with gold rebounding higher. West African Resources climbed 7.8% to $3.17.

[00:13:23]Orabanda Mining was up 7.5% to $1.36, and Newmont rose 3.8% to $151.27.

[00:13:30]BHP rose 2.9% to $62.31.

[00:13:36]Travel stocks rose on the shifting geopolitical landscape with Qantas up 3.2% to $9.44 and Flight Centre rising 8.2% to $10.93.

[00:13:47]Commonwealth Bank came to 2.2% to $165.02 amid end-of-month rebalancing while ANZ National Australia Bank and Westpac all rose and just a little.

[00:13:58]Energy fell on the pullback in oil with Woodside Energy flat at $3.66 and Santos down 0.5% to $7.81.

[00:14:06]In corporate news, Judo Capital rallied 12.2% to $2.56 after pricing a $750 million capital securitization backed by SME loans, which analysts said would strengthen its balance sheet. IDP Education tumbled 16.2% to a record low of $2.23 after Macquarie reduced its rating to underperform and slashed its target share price by 57% to $2.35.

[00:14:33]Tourism Holdings soared 26.1% to $2.20 after BGH Capital and Queensland brothers Carl and Luke Troughton upped their offer to $3.10 New Zealand a share to buy the campervan business.

[00:14:52]Insurance Australia rose 1.2% to $7.66 as it settled a major portion of the long-running Greensill litigation, which it said would have no material impact on its financial position. Fortitude Medical surged 18.9% to $3.97 after it secured a commercial contract for CTVQ with SimonMed Imaging, operator of more than 170 outpatient imaging centers across the US.

[00:15:19]The Australian share market has been dominated in recent years by the banking bubble where two geysers of hot air ever-rising house prices and government-mandated superannuation savings have helped propel bank valuations to levels that are elevated when compared to history, the broader market, and its national peers.

[00:15:39]But, within 4 weeks, the holes in that bubble have been brutally exposed. Lost in the furor around the budget, the drama in the Middle East, and the artificial intelligence revolution is the fact that Australia's banking sector has quietly and relatively quickly slipped into a share market correction.

[00:15:59]Last Thursday, Macquarie Bank analysts said sales of new home loans will drop 30% in the calendar year 2027, pushing housing credit growth down from 7% to 3.5% and wiping between 1 and 2% off the earnings of the banks in the 2027 financial year, and as much as 4% in 2028. And according to UBS analyst John Story, if the big four banks had to pay 3% interest on the $370 billion pool of non-interest-bearing deposits they hold, their cumulative earnings would dive by as much as 18.3% if they had to pay a 5% interest, earnings could fall by more than 30%.

[00:16:46]So, it's a sobering picture, and the market has taken notice. Since the middle of April, the ASX 200 bank index is down almost 14%, but the index is still up 60% over the past 3 years, and JP Morgan analyst Andrew Triggs says bank valuations remain very much at odds with what he describes as the banks' growth outlook.

[00:17:11]Analysts have a target price of $130.77 on Commonwealth Bank shares, implying a 17% fall from current levels.

[00:17:20]In a local market increasingly dominated by index hugging passive strategies and superannuation funds, that would hurt seriously.

[00:17:30]The Aussie was at 71.86 US cents and 53.39 UK pence, while the 2-year bond was at 4.552% with markets now seeing a peak cash rate of 4.57% by early 2027.

[00:17:46]Bitcoin was muted on Friday as hopes for a confirmation of a peace deal between the US and Iran were offset by continued outflows from crypto-linked exchange-traded funds. The world's largest cryptocurrency was down around 6% in May, pressurized by soft ETF demand and expectations for higher interest rates. It was last 73,591 US, hovering near a more than 6-week low. Cryptocurrencies in general have come under pressure due to expectations for higher interest rates. With the critical straits of Hormuz effectively shuttered since the start of the Middle East conflict at the end of February, the global oil market has seen its biggest supply disruption ever. While oil prices have surged, jumping oil prices have in turn led to an inflationary shock. This has driven traders to increase their expectations of interest rate hikes by major central banks, including the Federal Reserve.

[00:18:41]Higher interest rate environments generally bode poorly for speculative assets such as cryptocurrencies.

[00:18:46]Institutional investors have also continued pulling funds from crypto-linked ETFs this month despite signs of US regulatory progress on crypto legislation. Data compiled by market trackers showed crypto ETF outflows exceeded $2.5 billion over the past 2 weeks amid heightened geopolitical uncertainty.

[00:19:06]And world number two crypto, Ethereum, shed 0.4% to $2,016 US.

[00:19:13]So, the question is, will the bubbles in markets continue to support the overall valuations or will they blink?

[00:19:20]Actually, that's something that we'll be discussing with Damien Klassen in my live show on Tuesday.

[00:19:27]Meanwhile, I call out and look out below because things could turn a bit nasty.

[00:19:35]I'm [snorts] Martin North from Digital Finance Analytics. Many thanks for watching and I'll see you again next time.

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