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- [00:02]
A
Good morning everyone and welcome to the Moving Markets podcast on Monday 22nd June. With me, Bernadette and Dareko. Joining me on today's podcast are my colleague Jan Bopp and our head of technical analysis, Mensor Pochinsi. But before we get into the most recent headlines, I'd just like to let you know our latest View beyond podcast went live this weekend. In it, Richard Tang, Head of Equity Research in Asia, speaks with the CIO of Lotus Asset Management, Hong Hao, about China's uneven market outlook. Hong Kong's old tech sector has lagged while mainland new tech, particularly AI infrastructure, continues to attract strong inflows and outperform. They discussed the prospects for a rebound in Hong Kong Internet stocks, the sustainability of the AI rally and liquidity risks from IPO activity. The podcast is called China's Old and New Tech Divide. So please take a listen after today's show. But now let's get back to the very latest financial markets news and this morning Yann is bringing us the main stories. Good morning to you, Yanni.
- [01:02]
B
Good morning to you, Benedet.
- [01:03]
A
Why don't we start with the broader market backdrop? We had a rather subdued end to last week with several major markets closed for holidays and investors while seemingly reluctant to take strong positions. But at the same time, geopolitical headlines still driving sentiment. So how did markets enter the weekend, Jan?
- [01:20]
B
In Europe, the Stoxx 600 slipped 0.2%. Energy and healthcare stocks helped limit the downside, but markets across regions dipped well. The Swiss SMI was the exception, eking out a little gain, but overall the mood was cautious, mainly because nobody wanted to take big risks over the weekend given expectations of US Iran talks, which can always go both ways.
- [01:44]
A
Yes, the involved parties met here in Lucerne in Switzerland at the weekend. Negotiations between the US and Iran have made tangible progress. Talks were focused on stabilising the Strait of Hormuz, which of course is crucial for global oil flows, but also as well, talks about Israel and Lebanon.
- [02:01]
B
Yes, and there have been some concrete outcomes. Actually we are hearing about easing restrictions on Iranian oil exports, the release of frozen assets and even a direct communication channel to avoid incidents at sea. There's also a so called deconfliction cell involving Lebanon to reduce spillover from the Israeli Hezbollah conflict. But, and this is key, Bernadette, the situation remains fragile. The whole process looked in doubt after Trump threatened fresh attacks on Iran on Sunday and Tehran said it had closed the Strait of Hormuz again. That's why markets are not fully pricing in a lasting resolution just yet.
- [02:39]
A
And that caution is also visible in oil markets, isn't it? You might expect strong price action, but the reaction seems more muted.
- [02:46]
B
Exactly. Brent crude and WTI were trading higher but turned negative after Iran suggested a mechanism would be set up to control the waterway. So markets see the progress, but not enough to justify a sharp positive reaction.
- [03:03]
A
That was also reflected in Asia this morning. It's been a choppy session, hasn't it?
- [03:07]
B
Yeah, absolutely. But there is strength in specific sector. Technology is the clear leader in Taiwan and South Korea. AI related shares pushed a regional tech index up more than two and a half percent at one stage. Japan's Nikkei hit a fresh all time high this morning, also driven by strength in tech. A standout story was in South Korea where LG Electronics jumped more than 12% at one point after news of a planned visit to Nvidia to discuss cooperation in robotics and physical AI. So those stories, Bernadette, are still well received by markets.
- [03:42]
A
Yeah, but not all of Asia is joining in the rally. So China in particular seems to be struggling again. What's weighing on sentiment there, Yan?
- [03:50]
B
It's weak consumption data which is the main concern. Hong Kong equities, but also the broader MSCI. China are approaching bounds market territory down nearly 20% from their October peak. And importantly, global investors are pulling money out. Chinese equity funds have now seen 12 straight weeks of outflows.
- [04:11]
A
Yeah, definitely a reason to listen to that view beyond podcast from Richard Tang and Hong Hao. But why don't we turn to the US now? Yann Blow Data paints a very strong picture. Investors still pouring into equities, especially tech. How significant is that trend?
- [04:26]
B
Well, it's Quite remarkable actually. US equity funds saw inflows of over US$119 billion in just one week. Technology is again the main magnet. But it's not just the mega caps, mid and small cap funds that also attracted significant flows. Meanwhile, Europe and as already mentioned, China are seeing consistent outflows, which highlights how dominant the US market currently is.
- [04:52]
A
Okay, let's change tack. What about the bond market? There's been a shift in tone from the Federal Reserve last week.
- [04:57]
B
Yes, a more hawkish tone has pushed US treasury yields higher. The 10 year yield is around 4.5% and that is also supporting the US dollar which is trading at a one
- [05:08]
A
year high, which brings us neatly onto currencies and indeed commodities. So gold. Gold's had a bit of a roller coaster ride and Sterling is also under pressure. What's the story? There's.
- [05:19]
B
Yeah, gold's rally proved short lived. The precious metal marked its third weekly loss last week, mainly due to the stronger dollar and higher yields. But we are seeing some stabilization this morning with gold up almost a percent, trading just shy of $4,200 per ounce. Sterling, meanwhile, is weaker. It's hovering near this year's lows amid reports that Prime Minister Keir Starmer may outline a timetable for stepping down already today and that political uncertainty is weighing on the currency. It's really a striking and somewhat sobering backdrop for the 10 year Brexit anniversary tomorrow.
- [05:58]
A
Oh, yes, let's not talk about that. Finally, a quick word on company news, Jan. SpaceX is making headlines, but not necessarily for the reasons it would like.
- [06:07]
B
Yeah, indeed, MSCI has given SpaceX its lowest ESG rating, triple C. The concerns center on governance, including shareholder rights and board independence. This could matter, especially in Europe where strict sustainability rules apply for some funds. Or as program director at the ATTAC Business Schools Climate Institute said, this is very close to a governance horror story for public market investors. Now, looking at the Futures Board, despite solid performance in Asia overnight, I see most indices pointing to a soft start to the week. So let's see what the day brings.
- [06:44]
A
Bernadette, Super Yan, thank you very much for bringing us the news highlights this morning.
- [06:49]
B
Thank you for having me.
- [06:53]
A
Okay, so now it's time to look at the markets from a technical perspective. Good morning to you, mentor.
- [06:58]
C
Good morning, Bergeret.
- [07:00]
A
So given what Jan said earlier, why don't we focus today on the US equity market? A big part of your job is tracking and assessing trends. So what is the current trend of the S&P 500?
- [07:12]
C
Well, the uptrend is intact. We have seen a short term consolidation here since May, but it's nothing to worry about. So the market structure remains quite healthy and the uptrend remains intact. So the view from technical point of view is that the rally can resume and equities can continue to climb the wall of worry.
- [07:32]
A
Okay, but in recent years we've heard a lot about a narrow market and also that the Magnificent Seven are holding up the market. Is that still true?
- [07:42]
C
Yes, I mean it's a, it's a valid concern. But this year it's the exact opposite. So imagine The S&P 500 is up almost 10%. And when you look at the Magnificent Seven, they're basically flat year to date. And if you look at the rest of the S, P 500, so the other 493 stocks, they are up 13% as a group. So we chose here a massive shift in sentiment. And of course it opens as well a massive opportunity to outperform because these seven stocks, they make up 30% of the market cap of the S P 500 and I think almost 20% of the MSCI world. So if you don't own these stocks, you have probably outperformed here to date. If you own too many of them, you probably underperformed year to date.
- [08:37]
A
All right, then perhaps you could share with us which areas you prefer in the US Equity market at the moment.
- [08:42]
C
Mensor yes, still the center of our focus is semiconductors. We think that the uptrend here is not only intact, but that this group is climbing the wall of worry. There is of course fear that there is excessive optimism in some of our sentiment data. We don't see this. We see rather the opposite. So from that point of view, we think investors should still prefer the semiconductor space and be quite selective in the technology space. So software is still struggling and as said before, the Magnificent seven as a group is struggling still. So the conclusion here is for investors to have a preference for semiconductor stocks in the US which by the way, look bullish globally as well.
- [09:27]
A
Super. Very interesting. Thank you very much as ever for joining the show. Mensor.
- [09:30]
C
Thank you, Bernadette.
- [09:35]
A
And that brings us to the end of today's podcast. I hope that you enjoyed the conversation. Thanks again to my guests. Please do come back and join me again tomorrow when I'll be here with more of our experts to keep you in the loop on what's moving markets. Meanwhile, good luck today and in the week ahead. And goodbye for now.
- [09:59]
D
The information and opinions expressed in this podcast constitute marketing material and are not the result of independent financial or investment research. Please refer to www.juliusbear.com legal podcasts for further other important legal information.