Report by Renta 4
Flat opening on European markets (Eurostoxx 50 futures 0%) following yesterday’s session, which was characterised by falls in the technology sector (Nasdaq down 3%), amid worsening sentiment surrounding AI due to a combination of factors, notably advances in Chinese models that could offer better value for money – a form of competition that could cast doubt on the leadership of the major US tech firms.
Even so, for the time being, this appears to be a healthy and reasonable bout of profit-taking following the strong cumulative gains. In this regard, US futures are edging higher (S&P 500 up 0.2%, Nasdaq 100 up 0.6%) and South Korea’s Kospi is up 3%. We would also highlight that SpaceX has successfully completed a bond issue worth $25 billion, with demand reaching $89 billion, in what was its first debt issue in the ‘investment grade’ market (coupon rates ranging from 5.35% to 6.65% depending on maturity).
Looking ahead to today, there will be two main focal points: the German IFO index and Micron’s results, although we will also be closely monitoring the US–Iran negotiations, with visible disagreements regarding the use of the unfrozen Iranian funds – reportedly in two tranches of US$12,000 mln each, according to Iran, though this figure has not been confirmed by the US side. Furthermore, the US maintains that the funds must be used to purchase American agricultural products (which would amount to a hidden subsidy for American farmers, a key constituency for the Republicans ahead of the mid-term elections), whilst Iran seeks to have free disposal of the money. Added to this is the fact that, according to the US, Iran has agreed to future nuclear inspections, whilst Iran denies this. Furthermore, there is still no agreement regarding the future of the Strait once the 60-day negotiation period ends, with the US seeking free passage, but Iran intending to levy tolls jointly with Oman from day 61 onwards. These contradictions regarding the content of the MoU reduce the likelihood that the nuclear negotiations over the next 60 days will yield any concrete results, and they highlight the fragility of the agreement.On the macroeconomic front, Germany’s IFO index could continue to improve in June, buoyed by expectations of a peace agreement between the US and Iran that would curb the inflationary shock and the potential negative impact on growth.
At the corporate level, Micron Technology is due to report its results today, which are relevant to the AI investment thesis. With a year-to-date gain of around 270 per cent (despite a 13 per cent fall yesterday) and tight valuations, any sign of a slowdown in AI demand could intensify the declines across the sector.
Yesterday we saw FedEx’s results, which are significant given its status as a global logistics operator, making it a good economic barometer. The figures beat estimates, although the 2026 guidance came in slightly below expectations (due to additional costs from inflation, transport and wages), triggering a 6% fall in after-hours trading. The message was clear: global trade is holding up, but under mounting cost pressures.
In the foreign exchange market, we note the euro’s fall to one-year lows, a downward pressure recently intensified by the ECB’s more “dovish” stance compared to the more ‘hawkish’ stance of the Fed, as well as leading economic indicators (June PMIs) in the Eurozone showing contraction for the third consecutive month and a clear easing of inflationary pressures – a development all the more significant given that these surveys were largely conducted before the provisional peace agreement between the US and Iran. This context should allow the ECB to pause following June’s rate hike, as priced in by the market, which does not expect any further 25 bp increases until Q4 2026. The differing tones adopted by the ECB and the Fed have widened the US-Germany 2-year yield spread to a 9-month high, which continues to strengthen the dollar, now trading at 1.136 against the euro. A more ‘hawkish’ Fed also continues to weigh on gold, which has fallen by 23% since the start of the war.
