A reality check for AI?

Summary

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Moving Markets — “A Reality Check for AI?”

Podcast: Moving Markets by Julius Baer
Date: June 5, 2026
Host: Mike Grauber
Guests: Lucia Tachulovic (Product & Investment Content Team), David Cole (Chief Economist)

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Episode Overview

This episode of Julius Baer’s Moving Markets provides a comprehensive daily market update, focusing on recent inflation data, labor market trends, geopolitical developments, and standout movements in global equity markets—especially the tech sector. Later, Chief Economist David Cole previews the upcoming European Central Bank (ECB) meeting, analyzing likely moves, policy challenges, and the broader macroeconomic context.

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Key Discussion Points and Insights

1. Global Inflation and Economic Data

[00:02–02:05]

• Switzerland:

  • Inflation remains steady at 0.6% in May, unchanged from April.
    • Driven by housing and hospitality price increases; offset by lower airfares and heating oil.
    • The strong Swiss franc is cushioning imported inflation.
  • Quote:
    “Policymakers don’t seem concerned. It’s still well within their stability range and the medium term outlook hasn’t really shifted.”
    — Lucia Tachulovic [01:25]

• United States:

  • Initial jobless claims up slightly, likely due to the start of school holidays.
  • Layoffs remain low, suggesting a “low hire, low fire environment.”
  • Anticipation for non-farm payrolls data, expected to show around 85,000 jobs added in May.
  • “That is slower than the post pandemic boom, but still strong.”
    — Lucia Tachulovic [02:21]

2. Geopolitical Risks and Market Reactions

[03:00–03:55]

• Middle East:
  • Oil prices dropped ~3% after President Trump indicated willingness to maintain a truce with Iran, but tensions persist (Hezbollah rejects ceasefire, Israeli troop withdrawal denied).
  • Gold prices momentarily increased as dollar weakened, but both oil and gold remain volatile.
  • “There’s a lot of back and forth, a lot of uncertainty. Both oil contracts are set to post their first weekly gain in three weeks.”
    — Lucia Tachulovic [03:12]

3. The Semiconductors Setback—A Reality Check for AI?

[04:10–04:44]

• Broadcom:
  • Suffered a record one-day drop, down 13%, erasing $300+ billion in value due to disappointing demand for custom AI chips.
  • This triggered broad sell-offs in the semiconductor sector (ARM, Micron down).
  • “Investors had very high expectations and the reality didn’t meet those forecasts.”
    — Lucia Tachulovic [04:10]
  • Despite correction, sector remains up year-to-date.

4. Broader Equity Markets Performance

[05:00–07:16]

• Europe:
  • Surprised with market resilience—Stoxx 600 up nearly 0.5%.
  • Universal Music Group dropped 5% after Pershing Square exit.
  • “All major bourses closed in positive territory.”
    — Lucia Tachulovic [05:00]
• United States:
  • Dow Jones hit record highs (UnitedHealth, JPMorgan, Walmart led gains).
  • Nasdaq closed in the red amid tech selloff.
  • Rotation from tech to defensive stocks; small caps (Russell 2000) gained 1.5%.
  • “We observed a rotation out of tech and into more defensive non tech stocks.”
    — Lucia Tachulovic [05:35]
• Asia:
  • Tech-led declines, particularly in South Korea (Samsung -5%, SK Hynix -8%), Japan also lower.
  • India bucked the trend; Sensex traded higher.
  • “Asian tech shares largely followed the lead of their US counterparts.”
    — Lucia Tachulovic [06:25]

5. Key Events to Monitor

[07:16–07:50]

• Market eyes US non-farm payrolls, hourly earnings, unemployment rate, and labor participation for macroeconomic signals.
• US futures trade lower—uncertainty over how the week will end.

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Expert Interview: David Cole on the ECB’s Next Moves

6. ECB Policy Outlook and Rate Hike Expectations

[08:04–09:02]

• ECB widely expected to raise rates by 25 basis points on June 11.
• Drivers: accelerating inflation and clear signaling from ECB.
  • “We expect a rate hike at next week’s meeting.”
    — David Cole [08:19]

7. Balancing Inflation and Growth Risks

[09:02–11:32]

• ECB’s future guidance uncertain—reluctant to pre-commit to further hikes.
• Market expects two or three more hikes; David argues for caution:
  • Slowdown in manufacturing PMI, weak growth backdrop.
  • Recent inflation pass-through from energy into services.
  • “We think the ECB will do one rate hike going forward and then put much more emphasis on the soft growth which is unfolding in the Eurozone...”
    — David Cole [10:49]

8. External Risks and the Role of Geopolitics

[11:32–13:08]

• ECB factors in external events only when inflation or supply chains are directly hit.
• Signs of easing tensions in the Middle East could mean less pressure on energy prices.
  • “Uncertainty is always there when we talk about the future, but it’s really when this uncertainty causes prices to go up...this is something where we see also a development which is probably more conductive not to increase rate two times, three times...”
    — David Cole [12:28]

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Memorable Quotes & Moments

• On the Swiss outlook:
  “Policymakers don’t seem concerned. It’s still well within their stability range and the medium term outlook hasn’t really shifted.”
  — Lucia Tachulovic [01:25]

• On tech’s tough day:
  “Investors had very high expectations and the reality didn’t meet those forecasts.”
  — Lucia Tachulovic [04:10]

• On Fed and ECB uncertainty:
  “We think the reluctance will increase to increase rates further. First of all, monetary policy after the rate hike might be very neutral so not any more loose...”
  — David Cole [10:30]

• On global context:
  “Uncertainty is always there when we talk about the future, but it’s really when this uncertainty causes prices to go up...”
  — David Cole [12:28]

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Important Timestamps for Key Segments

• 00:02 — Opening and today’s agenda
• 01:01 — Swiss inflation data
• 02:05 — US labour market insights
• 03:00 — Middle East and oil price moves
• 04:10 — Semiconductor sector correction (Broadcom)
• 05:00 — European equity market update
• 05:35 — US equity market rotations
• 06:25 — Asian markets and tech
• 07:22 — Preview of upcoming key economic events
• 08:04 — ECB rate outlook with David Cole
• 09:24 — Growth vs. inflation — ECB’s policy challenge
• 11:50 — Geopolitics and external risk for ECB
• 13:10 — Closing remarks

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Tone and Style

The episode maintains a professional, analytical tone, with clear, concise language and a focus on practical market implications without sensationalism.

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Conclusion

This episode delivers a succinct yet thorough overview of key market developments, blending immediate price action with broader macroeconomic and policy considerations. The discussion on the AI and semiconductor correction stands out, underscoring shifting investor sentiment and the fragility behind headline gains in the tech sector. Meanwhile, the ECB preview offers nuanced insight into how central banks are navigating conflicting signals from inflation, growth, and geopolitics—crucial context for investors in the current climate.

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Transcript

[A]

Good morning and welcome to Julius Baer's Moving Markets podcast. I'm your host, Mike Grauber. Today is Friday 5th June. We'll begin as always with our market update, reviewing the key developments from the past 24 hours. I'm joined by Lucia Tachulovic from our product and investment content team. She will bring us up to speed on the latest market moves. And after that, I'm pleased to welcome David Cole, our chief economist, who will give us a preview of the highly anticipated ECB meeting next week. Amid renewed flare up in inflation. This week a report showed that eurozone services inflation accelerated sharply, jumping to 3.5% in May, underscoring price pressures well above the ECB's target. But first, let's start with a roundup of the latest development in global financial markets. Good morning, Lucia.

[B]

Good morning, Mike.

[A]

Lucia, let's dive straight into what moved the markets. Yesterday we saw a mix of signals, easing geopolitical tensions, surprisingly resilient economic data and some notable shifts in individual stocks. Let's begin with inflation. Switzerland released figures yesterday showing it held steady at 0.6% in May.

[B]

Yes, that's right, Mike. So inflation held steady at 0.6%, unchanged from April, which suggests price pressures aren't picking up. We did see a small month on month increase, mainly driven by housing and hospitality. But that was partly offset by lower airfares and heating oil. Importantly, the strong Swiss franc continues to cushion imported inflation. So overall, while Q2 inflation might come in slightly above the S&P's earlier forecasts, policymakers don't seem concerned. It's still well within their stability range and the medium term outlook hasn't really shifted.

[A]

Let's stay with macroeconomic data and move on to the US where we got some labour market data yesterday. Now, initial jobless claims ticked up slightly, but the overall narrative appears to be one of resilience. Can you elaborate?

[B]

Yeah. So the slight increase in jobless claims is likely attributable to school holidays beginning. More importantly, the number of planned layoffs remains comparatively low. Analysts describe the current situation as a low hire, low fire environment. So companies seem hesitant to aggressively expand hiring, but also aren't rushing to make cuts. Now we are anticipating the non farm payrolls report later today will confirm this moderate growth, potentially showing around 85,000 jobs added in May. That is slower than the post pandemic boom, but still strong.

[A]

And now let's also talk about what's still dominating headlines. The Middle east, of course. Oil prices experienced a significant drop yesterday. What triggered that decline?

[B]

Well, news emerged indicating that President Trump signaled a willingness to maintain the existing truce with Iran, albeit with a warning regarding potential retaliation against US forces. WTI and Brent both fell by around 3% yesterday. Gold, conversely, saw a bump as the dollar weakened and bond yields dipped. But overnight, Mike, we had news that the Iran backed Hezbollah rejected a new ceasefire in Lebanon and Israel said it would not withdraw its troops. So there's a lot of back and forth, a lot of uncertainty. Both oil contracts are set to post their first weekly gain in three weeks. And gold is trading lower again.

[A]

So the stalemate in the Middle east continues. Now let's turn to semiconductors. They've been high flyers in recent weeks, but yesterday we saw Broadcom suffering a substantial setback, falling 13%. What happened there?

[B]

So Broadcom's results disappointed, specifically concerning demand for their custom AI chips. Investors had very high expectations and the reality didn't meet those forecasts. Now as a result, the stock plummeted, wiping out over US$300 billion in market value. It's one of the biggest one day wipeouts ever. And yeah, unsurprisingly this sent ripples through the broader semiconductor sector, causing others like ARM and Micron to also experience declines.

[A]

Absolutely. But okay, they are still up substantially this year, but certainly bears watching this sector. Now let's finally catch up on how the overall equity markets fared, starting with Europe. How did markets react amidst all that's been going on?

[B]

Surprisingly positively. European stocks actually closed high yesterday, defying the initial concerns surrounding the Middle East. The Stoxx 600 gained nearly half a percent and all major bourses closed in positive territory. But there was a bit of a divergence with some regional sectors performing better than others. Now, notably, Universal Music Group faced headwinds, dropping nearly 5% after Pershing Square exited its stake after two failed takeover attempts.

[A]

And across the pond, how did the US fare?

[B]

So the US Painted a more contrasting picture. The Dow Jones Industrial Average soared to a new record high, fueled by gains in established names like UnitedHealth, JPMorgan Chase and Walmart. However, the Nasdaq lagged behind, closing in the red. It was weighed down by the weakness in the chip sector. Following Broadcom's troubles, we observed a rotation out of tech and into more defensive non tech stocks. And this rotation proved especially beneficial for small cap stocks. The Russell 2000 climbed 1.5% yesterday.

[A]

All right, then let's take a look at what happened overnight. Let's focus on Asia. Now, given the rotation away from technology we discussed in the US Session, did we see similar patterns emerge in Asian markets?

[B]

Yes, we did. So Asian tech shares largely followed the lead of their US counterparts. The impact was particularly noticeable in South Korea, where the heavy chip weighted market saw substantial losses. When I last checked, Samsung Electronics was down around 5% and SK Hynix shed nearly 8%. Japan's tech sector also felt the heat, with both Tokyo Electron and Advantest falling sharply.

[A]

And I see we also received Japanese household spending data overnight which came in better than expected. On another note, the Reserve bank of India kept its policy rate unchanged at 5.25%. So how did the broader region fare?

[B]

Overall, most Asian markets were trending lower. However, India's Sensex actually traded in positive territory.

[A]

And looking ahead to today, what key events should investors be monitoring?

[B]

So Mike, we already mentioned the US non farm payrolls data, which will definitely be in focus today, along with accompanying data on average hourly earnings, the unemployment rate and labor force participation. These numbers will provide crucial insights into the health of the US labor market and economy. Now meanwhile, when it comes to US Stock markets, futures are trading lower. So let's see how we will finish the first week of June.

[A]

Super. Thank you very much for this comprehensive roundup, Lucia.

[B]

Thanks for having me, Mike.

[A]

And now as promised, we turn to our chief economist, David Cole. Good morning, David.

[C]

Good morning, Mike.

[A]

So the ECB meets again next week on 11 June Thursday. Markets clearly expect a rate increase after inflation picked up in recent months. What is your expectation for next week's meeting?

[C]

Well, as you said, it's widely expected that the ECB will hike rates by 25 basis points. Why? Well, inflation is of course one explanation. The second and more important is probably that they very much telegraphed their reaction function that when inflation. So already at the last meeting that when inflation is not only increasing further, but also in a broader sense that they are ready to hike rates. They are coming from an area where you can say monetary policy had been quite loose. So on the loose side and to signal that they will not allow inflation to go further up, they already telegraphed well again that they will hike rates. So we expect a rate hike at next week's meeting.

[A]

Markets are pricing in two to three rate increases by year end, potentially taking the deposit rate close to 2.75%. But of course there are also growth risks out there. This week's Eurozone manufacturing PMI showed slowing momentum. David, how do you assess this growth inflation balance and how challenging does it make the ECB's task?

[C]

Yeah, indeed you are right. So after this or next week's hike it will get more difficult really to call what to call the ECB monetary policy trajectory. So will they hike, will they not hike? And indeed also to assess what's more important. One thing first when we looking at the ECB meeting next week, most likely the ECB will be very reluctant to pre commit themselves. So I expect very few signals what they will do next on the July meeting. On September meeting we will nevertheless have updated macroeconomic projection from the ECB. That means inflation, GDP and exactly their we can probably get a bit more insights how the ECB thinks about the gross inflation backdrop. We think the reluctance will increase to increase rates further. First of all, monetary policy after the rate hike might be very neutral so not any more loose. And second, and that's probably very important to focus on the gross backdrop, you mentioned it on the PMIs, but you see it also in other indicators is such as that it makes it very difficult that this inflation surge which we have seen so far which is energy price driven now went also in the service sector due to transport costs and package tours will really broaden in that sense that also the labor market that wage agreements add to inflation pressure further down the road. And this is probably something which we think the ECB will consider at some point and not hike further interest rates. So you mentioned the two, three rate hikes which are priced in by the money market curve. We are much more cautious about that. We think the ECB will do one rate hike going forward and then put much more emphasis on the soft growth which is unfolding in the Eurozone and and stay on hold for the remainder of the year.

[A]

And let's take global perspective. Uncertainty is still high from geopolitics to diverging central bank paths. How much does the ECB need to factor external risks into its policy outlook beyond domestic inflation and growth dynamics that you just mentioned?

[C]

Well, they do and it's probably I would say they will mention the uncertainty and this is definitely something they talk about. At the same time I would say that's probably not the crucial part of the external environment. It's only when the uncertainty as we have it right now has a sizable impact on inflation or supply chains. And this has happened with the conflict on the Middle east. But we just mentioned it. There's like more and more signs that some kind of deal might evolve. And this would definitely help because any thing what you call a deal will probably involve lower energy prices, will involve less pressure on supply chains. And this is exactly what the ECB is looking at. Besides the overall picture of uncertainty, which is there. Uncertainty is always there when we talk about the future, but it's really when this uncertainty causes prices to go up, either in the energy space or on a broader sense in supply chains. And this is something where we see also a development which is probably more conductive not to increase rate two times, three times, because we've seen some calming there, in particular on the energy price front.

[A]

Very interesting. Thank you very much for joining us today.

[C]

David thank you, Mike,

[A]

and that's all for today. So many thanks to our speakers this morning and thank you for tuning in. If you enjoyed today's episode and haven't yet subscribed, don't forget to do so. And please consider leaving us a review on your preferred podcast platform. Do join us again on Monday when we talk again about what's moving markets. Until then, have a great weekend and goodbye for now.

[C]

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