Blog week ending, 8th May 2026
Markets:
- Local and global equity markets moved higher this week, supported by optimism around a potential US-Iran agreement and investors insatiable appetite for US technology and A.I. related stocks.
- The breadth of equity market winners has aggressively narrowed again, with gains concentrated in a small group of technology and AI companies – now among the tightest levels of market breadth seen in the past 25 years, which remains a key risk.
- UK 10-year government bonds rose to 5.1%, their highest level since July 2008, as investors anticipated potential Bank of England rate hikes to address inflation pressures.
- The US company reporting season remained robust, with the share of companies missing expectations at its lowest since 2021 despite the oil price shock, tariff turmoil, and consumer worries. Much of the heavy lifting has been driven by Technology and A.I focused.
- In local stock news, Westpac’s first-half profit missed expectations, with CEO Anthony Miller highlighting concerns about the impact of the Middle East conflict on customers.
- Coles CEO Leah Weckert warned investors that the supermarket’s suppliers are seeking price increases as higher fuel costs from the Iran conflict add upward pressure on freight expenses.
- Seven OPEC+ members agreed to increase production to 188,000 barrels per day from June, marking the first decision since the UAE’s departure from the cartel.
- Oil prices fell sharply this week on news of a potential US-Iran agreement, before rebounding later on renewed tensions between the two countries.
- The Japanese Yen rose to its strongest level in over two months, prompting speculation of further Japanese central bank intervention following its support measure in late April
Economy:
- The RBA lifted the cash rate by 0.25% to 4.35% in May, their third consecutive rate hike. The decision was passed by an 8-1 vote by the Board, compared to the narrower 5-4 split in March, and keeps the door open for further tightening.
- Australian household strengthened in March, supported by higher fuel prices, though the result was slightly lower than expectations. Spending volumes rose, led by essential items, whilst most discretionary categories declined.
- Australia’s services showed modest improvement in April, with activity revised slightly higher from March’s weakest level since November 2023. The rebound was supported by ongoing job creation, however new orders continued to fall as demand remained subdued amid higher costs.
- Australia recorded its first monthly trade deficit since 2017, with the balance falling to a $1.8 billion deficit. The outcome was driven by a sharp rise in imports, particularly fuel, lubricants, and equipment, whilst export values fell by 2.7%.
- US factory orders rose 1.5% in March beating market expectations. Durable goods orders increased for the first time in three months whilst computers and electronic products surged 3.6%, the most since March 2001.
- Market pricing currently reflects a 50% probability that the US Federal Reserve will hold rates steady by year end, with a 32% chance of one further rate hike.
- The US trade deficit widened to US$60.3 billion in March, up from $57.8 billion, driven in part by a $2 billion increase in computer accessory imports. The deterioration has prompted US trade representatives to launch hearings into excess industrial capacity across trading partners.
- US exports rose 2% to a record US$320.9 billion in March, driven by a $6.5 billion increase in goods exports. Industrial supplies and materials led the gains, up $5 billion driven by higher energy prices.
- US Private payrolls increase by 109,000in April, the largest increase since January 2025 and above market forecasts of 99,000. However, hiring has slowed overall, reflecting weaker labour force growth and reduced immigration.
- US job openings fell by 56,000 to 6.866 million in March, above market expectations.
- A key European Central Bank policymaker warned that recession risks in the Euro area are rising, driven by the ongoing energy shock.
- Euro area manufacturing activity rose in April to its highest level in nearly four years, with output expanding at the fastest pace since August. The improvement was supported by stronger demand, including some front-loading orders linked to the Iran conflict.
- Eurozone services activity slumped in April, falling to a 62-month low and slipping into contraction for the first time in almost a year, with new business falling as the Middle East conflict weighed on demand and disrupted the recovery.
Politics:
- US President Trump announced “Project Freedom” directing the US Navy to escort neutral commercial vessels through the Strait of Hormuz, while warning of potential military action if Iran interferes.
- Iran submitted a fourteen-point response to the US via Pakistani intermediaries outlining a thirty-day ceasefire focused on ending the conflict, with nuclear issues to be addressed separately at a later stage.
- Subsequent reports suggest the US and Iran are close to agreeing on a one-page 14-point framework, including a temporary halt to Iran’s nuclear enrichment, partial US sanctions relief, and a 30-day window to negotiate security arrangements for the Strait of Hormuz.
- President Trump announced plans to increase tariffs on European Union cars and trucks to 25%, breaching the 15% cap agreed under the US-EU trade deal, citing alleged non-compliance by the EU.
- Japan’s Prime Minister Sanae Takaichi visited Australia for a three-day visit, with discussions focused on defence cooperation, critical minerals, and broader economic security.
- President Trump said he is looking forward to meeting Chinese leader President Xi later this month, as China directed its companies to disregard US sanctions, further escalating trade tensions.
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
