Last week …
Was again on the slow side with retail trading yet to see a significant increase in volumes after the summer holidays. Turnover was up just €100million on the previous week.
The week started slowly with the US closed for the Labor Day holiday on Monday. Wednesday saw Oil prices rise above €100 a barrel and a bond market sell off ensued. The 10-year US treasury yield hit its highest level since 2023.
Thursday was a little quieter with the ECB following market expectations and raising interest rates by 0.25%. On Friday markets recovered slightly with the Stoxx 600 finishing up 0.5%. The index lost 2.2% over the course of the week however which was the biggest weekly loss since April.
Wednesday was the busiest turnover day of the week with Madrid particularly busy. Spanish retail giant Inditex released results for the first half of the year and were the second most traded stock on the day. Despite announcing record breaking figures, the stock finished down 3.6% as investors were alarmed at rising operating costs.
On Friday we saw a sector wide sell off for European weapons companies with Rheinmetall our second most traded stock and Indra Sistemas in fourth place. The big Spanish banks, Santander and BBVA, were again our most traded stocks over the course of the week.
In other news last week, Canadian tariffs on the US became active and there were several news articles warning of the dangers of AI for humanity.
This week …
Will be dominated by the US interest rate decision after close on Wednesday. We also have interest rate decisions due from Japan and the Bank of England.
A US interest rate rise is now priced in at around an 85% chance. The Bank of Japan is also expected to raise rates whilst the Bank of England is expected to hold.
So these decisions could potentially be a big source of volatility this week, especially in the unlikely scenario that the US does not raise rates.
The oil price will continue to weigh on markets this week with Iran cancelling a planned meeting today ending hopes of any immediate respite. Inditex’s results last week were a good example of how oil prices are impacting companies around the world. Despite record numbers being announced, Inditex’s share price still fell over 3% on Wednesday as they also declared that operating costs had risen 8%. These are the sort of pressures companies are facing which can only result in higher prices and rising inflation.
AI was back in the news last week with a number of articles raising concerns that the pace of growth could lead to AI becoming a threat to humanity. One whistle blower claimed that there was more than a 10% chance that AI could kill all humans. Whilst this feels a little far-fetched, we’ve all seen the Terminator films and there is a growing sense of discomfort that maybe someday soon something like that could actually happen. In another article, a researcher who had worked for both Anthropic and OpenAI, claimed that “neither company is acting responsibly”.
Incredibly, rather than playing down the seriousness of these articles, all three of the big AI bosses (Sam Altman, Dario Amodei and Elon Musk) announced that they were in agreement that the pace of development needs to slow. That is not what investors want to hear and tech stocks have dipped as a result. The problem is that the US is in a race with China to develop the technology fast enough to gain an upper hand on the other. Donald Trump played down concerns last week and declared that “whoever wins AI, wins!”. How do you slow down enough to keep ahead of China? Can these companies be trusted to do so? It’s just another area of uncertainty in a field already full of uncertainty. Now it’s not just “Is there an AI bubble?” or “Will AI be a huge job killer” but also “Will AI be a huge human killer”?
The result will almost certainly be ongoing tech sector volatility. There are so many unanswered questions in so many different areas. It’s both an exciting time and also quite a worrying time. It will be interesting to see how this story develops as there are so many ramifications for so many different areas of the world economy. Watch this space.
That’s all from me, don’t worry though, I’ll be back… Happy investing!
Carl Rogan
