Blog week ending, 5th June 2026
Markets:
- Markets started the week strongly before easing back on Thursday, with several indices reaching recent highs on optimism around a potential resolution in Iran and continued enthusiasm for AI-related stocks. A modest pullback of around 1-2% followed, driven by weakness in mining and energy sectors.
- US equity markets reached record highs, supported by improving sentiment around US-Iran negotiations and renewed momentum in AI-focused companies. Japanese and South Korean markets also climbed to fresh highs.
- Discussion around a potential AI-driven market bubble intensified, with semiconductor stocks on track for their strongest quarter on record. At the same time, unrealised losses among US private credit lenders have deepened to 2.35% of net asset value, the highest level since 2022.
- US government bond yields edged lower, as reports of progress toward a US-Iran agreement helped ease concerns around inflation and future interest rate increases.
- In local stock news, technology rallied, following strong gains in US peers. In contrast, consumer stocks came under pressure after the Fair Work Commission approved a notable wage increase, while real estate investment trusts fell after weaker-than-expected April building approvals data.
- Ampol shares rose after the competition regulator approved its takeover of EG Australia, subject to the divestment of 41 petrol stations.
- Oil prices were volatile, briefly surging after Iran halted talks with the US and threatened to fully close the Strait of Hormuz. Meanwhile, the US has drawn down around 14% of its Strategic Petroleum Reserve since the conflict began, further tightening supply.
- Energy market experts have warned OPEC+ that supply disruptions linked to the Strait’s closure could persist through to year-end, prolonging pressure on global energy markets.
Economy:
- Australia’s economy grew 0.3% in the March quarter, falling short of expectations and slowing from a 0.9% increase in the December quarter. This marks the weakest growth in a year, with softer conditions expected ahead.
- Australia returned to a trade surplus of $1.79 billion in April, following a downwardly revised $1.02billion deficit in March and broadly in line with expectations. Exports rose 7.2% to their highest level in three years.
- Australian capital city house prices were flat in May, with gains in Perth, Brisbane and Adelaide offset by declines in Sydney and Melbourne.
- The Australian Fair Work Commission approved a 4.75% increase in award wages, lifting the minimum rate to $26.44 per hour from 1 July. While supportive for household incomes, the decision may add to inflation pressures.
- Australian building approvals fell 3.4% in April, following a 10.5% decline in March, with weakness across all dwelling types. Over the past year, 200,424 dwellings have been approved, while new dwelling costs continue to rise.
- Inflation expectations in Australia are rising, with an RBA board member noting the Bank may need to act more aggressively to prevent expectations from becoming entrenched.
- Global central bank commentary was mixed, with one Fed official suggesting it is too early to consider further rate hikes, while an ECB policymaker supported tightening, and the Reserve Bank of New Zealand signalled potential future increases.
- The US household savings rate fell to its lowest level since 2022, highlighting ongoing affordability pressures.
- US private payrolls increased by 122,000 in May, the strongest result since January 2025 and above expectations, with hiring becoming more broad-based.
- US job openings rose sharply in April to around 7.6 million, signalling that labour market conditions remain relatively tight.
- US manufacturing activity strengthened in May marking the strongest expansion since May 2022. Production surged and new orders remained robust, supporting the sector’s momentum.
- Eurozone inflation rose to 3.2% in May, the fourth consecutive monthly increase and the highest level since September 2023, in line with expectations.
- Eurozone manufacturing eased in May, though it remained in expansion territory and came in slightly above preliminary estimates.
- Japanese manufacturing softened in May, from April’s strong levels, although activity continues to be supported by stockpiling linked to the ongoing conflict.
- China’s composite business activity index rose in May, marking a third straight month of expansion. The improvement was driven by a modest rebound in services, while manufacturing activity remained broadly flat.
Politics:
- US-Iran negotiations continued, with both sides exchanging proposals aimed at extending the ceasefire and reopening the Strait. However, talks stalled as Israel’s determination to pursue its own objectives added complexity to the process.
- Lebanon announced a partial ceasefire between Hezbollah and Israel, representing a limited de-escalation in a conflict that has caused significant casualties and intensified broader regional tensions linked to the US-Israel/Iran war.
- The US Commerce Department tightened restrictions on advanced AI chip exports, extending the ban to overseas subsidiaries of Chinese firms and closing a loophole previously used to access Nvidia technology.
- The US proposed new tariffs of at least 10% on imports from around 60 countries under a Section 301 investigation into forced labour. Higher tariffs of 12.5% are being considered for countries including China, India, and Japan.
This information is general advice and does not take account of investors’ objectives, financial situation or needs. Before acting on this general advice, investors should therefore consider the appropriateness of the advice having regard to their objectives, financial situation or needs.
Written by Christopher Lioutas
Chairman – Harbourside Investment Management
