A combination of renewed enthusiasm for AI, diverging manufacturing trends, and unresolved geopolitical tensions has set the tone for markets this week. Excitement in the technology sector followed reports that Anthropic, the artificial intelligence company behind ChatGPT rival Claude, is taking steps towards a US stock market listing. The company was reportedly valued at $965 billion in May and could soon be joined on public markets by other AI heavyweights, including OpenAI and SpaceX. The prospect of these listings is viewed as further evidence of the growing appetite for AI and large-cap technology investments. Importantly, the publication of prospectuses would provide investors with a first detailed look at the finances of some of these firms, potentially easing concerns about an AI-driven market bubble that have surfaced in recent months.
Meanwhile, India’s manufacturing sector expanded at its fastest pace in three months during May. In PMI terms, a reading above 50 indicates expansion, while a figure below 50 signals contraction. The S&P Global Manufacturing PMI rose to 55.0 in May from 54.7 in April, supported by a surge in new orders that helped drive growth. However, businesses reported a weaker outlook than earlier in the year. Ongoing conflict in the Middle East could place upward pressure on inflation in the coming months, while a weakening currency may also weigh on economic growth. These factors present a challenge for the Reserve Bank of India, which meets on Friday to determine its latest monetary policy stance.
Closer to home, British manufacturers reportedly raised prices at the fastest pace since 2022 in May, reflecting growing cost pressures that are likely linked to supply chain disruptions and higher energy prices stemming from tensions involving Iran. These developments have added to concerns about the UK’s inflation outlook. However, Bank of England Governor Andrew Bailey recently stressed that policymakers view higher energy costs as the primary driver behind the recent uptick in inflation, rather than evidence of broader underlying price pressures. This assessment has helped justify the Bank’s decision to keep interest rates on hold for now. That said, if rising costs begin to feed through more widely into goods and services across the economy, the Bank may be forced to reassess its stance and consider maintaining tighter monetary policy for longer.
Currently, there have been no significant new developments in the US-Iran peace talks, with President Trump stating to journalists this week that he is unconcerned about whether negotiations continue. Reports suggest that both sides may not be fully adhering to the ceasefire agreement, as renewed conflict was reported near the Strait this week, although President Trump has strongly denied claims that negotiations have stalled entirely. While the geopolitical situation remains fluid and headline-driven, financial markets have so far demonstrated resilience to recent developments. While we continue to monitor the situation closely, particularly given the strategic importance of the Strait to global energy markets, it is essential to note that at present there has been no material disruption to trade flows, broader market stability, and that oil prices (though fluctuating) remain lower than previous levels seen when the war began.
Still to come this week we have Eurozone PPI, retail sales and GDP and US non farm payrolls as well as data on their unemployment rate.
Nicola Tune, Portfolio Specialist