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- Equities: Global equities declined due to weaker-than-expected economic reports, including a sharp decline in consumer sentiment and contracting services sector
- Credit: With the Fed possibly contemplating an end to quantitative tightening, investors should consider deploying cash to credit and securing against cash reinvestment risk
- FX: The tariff and US exceptionalism themes are both fading
- Rates: UST yields which have been buoyant could face downside risk if economic data weaken; risk-off sentiment last Friday exhibits some of this vulnerability
- The Week Ahead: Keep a lookout for US Change in Initial Jobless Claims; Japan Industrial Production Number
Global equities face losses from disappointing data. US major indexes posted their worst performance of 2025 with the Dow and NASDAQ both declining 2.5%, while the S&P 500 shed 1.7%. Economic data showed a slowdown in business activity as Services PMI dropped into contraction territory at 49.7, its lowest reading in over two years. Consumer sentiment plummeted by nearly 10% with inflation expectations rising to 4.3%. Walmart's weak guidance added to concerns over consumer spending, while geopolitical and tariff uncertainties fuelled broader market risk aversion.
The STOXX Europe 600 Index rose 0.26% as optimism about the potential resolution of the Russia-Ukraine conflict boosted Europe equities. Japan’s stock markets fell over the week with the Nikkei 225 losing 0.95% due to yen strength and rising Japanese government bond yields. Bolstered by government support for private enterprises, along with renewed optimism in the tech sector, the Shanghai Composite and Hang Seng Index advanced 0.97% and 3.8% respectively.
Topic in focus: Global consumer electronics benefitting from AI integration. AI-powered devices are rapidly driving growth in the consumer electronics market. Advancements in AI spanning generative AI, personalised experiences, and enhanced processing power, are fuelling a robust expansion with AI-embedded smartphone and PC shipments projected to grow at CAGRs of 29% and 58% respectively from 2024 to 2028. Market leaders in smartphones like Apple, Samsung, and Xiaomi command shares of 19%, 18%, and 14% respectively, while Lenovo, HP, and Dell hold 24%, 20%, and 15% in the PC sector. Increased demand for AI PCs, accelerated by the shift from Windows 10 to Windows 11, along with the rollout of GenAI smartphones—further boosted by the wealth effect in emerging markets like India and Southeast Asia—are set to expand the installed base significantly.
Strong earnings in consumer electronics have underscored this trend with companies such as Dell and Sony outperforming expectations due to robust demand for AI servers, PCs, gaming, and imaging products. While Apple faces delays in its AI-Siri rollout, Asian brands like Xiaomi and TDK are benefitting from premiumisation and recovery in smartphone sales, along with increased demand for sensors and storage. Overall, OEMs of smartphones and PCs are well-positioned to capitalise on the growing appetite for AI-enabled devices.
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