Weekly house view

The week in review

SpaceX set out plans for what could be the biggest IPO in history with a total addressable market worth USD 28.5 tn, a figure approaching the size of the entire US economy. These potential revenue opportunities – ranging from launch services to space infrastructure – are part of the SpaceX mission to “make life multiplanetary”. Private equity investors stand to benefit the most. Governance structures and concentration of control will be important to watch.

Last week also saw bond yields rise on resilient US growth, price pressures, and fiscal concerns. The yield on 30-year US Treasuries rose above 5.1% to its highest level since 2007. The move in bond markets has not yet affected equities. The S&P 500¹ rose 0.9%.

Mediators stepped up efforts to extend a ceasefire between the US and Iran, but a deal will not be a cure for bond markets given the structurally higher inflation resulting from the war. The longer the conflict lasts, the less important the Strait of Hormuz will become as alternative routes are built. The United Arab Emirates has half built a pipeline extension as one alternative.

In the corporate world, there was fresh evidence that artificial intelligence (AI) is adding to inflationary pressures – at least in the short run – with a Samsung pay deal including bonuses worth up to eight times base salary for some memory-chip workers.

Quote of the week

“I would support removing the ‘easing bias’ language in our ‌policy statement to make it clear that ⁠a rate cut is no more likely in the future than a rate increase,” Federal Reserve Governor Christopher Waller said.

Key data

The US economy remains resilient, with the flash composite Purchasing Managers' Index (PMI) for May unchanged at 51.7. The US is less exposed to energy shocks than Europe andAI-related capital expenditure adds support.

Europe is starting to feel the impact of the Iran conflict. The euro zone composite PMI fell to its lowest since October 2023.

China is also feeling the impact, with industrial production growth slowing to 4.1% year-on-year in April from 5.7% in March, and retail sales up just 0.2%. Only Chinese exports were strong, up 14.1% in April on the year.