Markets have made a mixed start to the week. US equities have rebounded, led by a recovery in technology and AI-related shares as investors look ahead to a busy slate of Big Tech earnings and the Federal Reserve’s interest rate decision. In contrast, the FTSE 100 has lagged, weighed down by weakness in HSBC following its latest results and a degree of caution ahead of the UK Budget.
This week, markets reacted to President Lula da Silva’s re-election in Brazil, following a dramatic turnaround in the second round of voting. The result prompted concerns over the potential for increased government spending, as Lula has pledged to improve living standards for the country’s poorest households. This has brought the outlook for public finances into sharper focus, weighing on investor sentiment and contributing to sharp falls in some Brazilian stocks. Nevertheless, Brazil’s strong commodity export revenues could provide an important source of support for the economy and the real, which initially weakened following the result, even while concerns over fiscal policy are likely to remain the dominant focus for investors in the near term.
Elsewhere, AI company Anthropic has filed a registration statement with the US Securities and Exchange Commission ahead of a potential public listing, offering investors an insight into its financial position. Revenue surged from $1.2 billion in the first half of 2025 to $16.3 billion in the first half of 2026, reflecting the rapid adoption of its AI products. However, the cost of supporting this expansion remains substantial, with the company reporting an operating loss of $693 million over the first six months of 2026. While questions around the valuations AI companies may command remain, leading businesses across the sector continue to meet and exceed earnings expectations, demonstrating their ability to turn strong demand into tangible commercial growth.
In Europe, bond markets found some relief after Moody’s reaffirmed France’s credit rating, avoiding a downgrade that some investors had feared. The decision helped ease pressure on French government bonds, with yields falling and the gap between French and German 10-year government bond yields narrowing at the start of the week. Nevertheless, Moody’s maintained a negative outlook, reflecting ongoing concerns about France’s public finances and its ability to implement a credible deficit-reduction plan amid a backdrop of political uncertainty.
On Tuesday, the FTSE 100 came under pressure following HSBC’s latest quarterly results, as revenue fell short of market expectations. Revenue increased by 5% to $18.6 billion, below forecasts of approximately $19 billion, with a slowdown in the bank’s wealth business contributing to the shortfall. Wealth division revenue was broadly flat at $2.7 billion, following stronger growth in the previous two quarters. Despite the disappointment, the results were not uniformly negative. Pre-tax profit rose by 32% to $9.6 billion, broadly in line with expectations, while the bank announced a share buyback of up to $1 billion and reaffirmed its profitability targets through 2028. Although the revenue miss weighed on sentiment, HSBC’s shares remained around 9% higher year to date, suggesting the latest figures need to be viewed in the context of its broader performance rather than as evidence of a sustained deterioration.
Still to come this week, investors will closely watch earnings from Microsoft and Alphabet, alongside the Federal Reserve’s latest interest rate decision.
Nicola Tune, Portfolio Specialist