Ground control to Major Musk, take your protein pills and put your helmet on. Sorry Mr Bowie

Let’s start with the monthly Flash PMI report from S&P Global. In a sentence, it provides further evidence of everything a central banker currently fears yet anticipates under current conditions. Weakening growth and higher prices, the dreaded stagflation. This week, the latest S&P Global flash PMIs for May were released. On a whirlwind tour of the major developed markets, the eurozone composite index fell sharply to 47.5 (down from 48.8 in April), representing a continuing contraction in the economy. Whilst, at the same time, input prices jumped to a 42-month high, threatening to push consumer inflation near 4%. I am willing to bet that, despite all the huffing and puffing, the ECB will leave rates unchanged next month in the face of this data.

 Unsurprisingly, we saw a similar picture in the UK, with the composite PMI dropping to a 13-month low of 48.5, missing expectations of 51.6.  Of particular note, the Services PMI, which accounts for the majority of our economic output, fell sharply to 47.9 (expected 51.7), hitting its lowest level since early 2021.  Despite inflation likely to creep higher in the coming months, I also believe the Bank of England will err on the side of caution when it comes to raising rates.

As for the US, the easier fiscal conditions the region enjoys continue to support that economy. The Composite PMI of services and Manufacturing remained stable at 51.7 and above the important 50.0 mark, dividing expansion and contraction. However, as is the case with the Euro area and the UK, input prices are rising. The next Fed meeting is not till mid-June, and I think we can safely bet that, despite the more hawkish tone of the Fed’s last meeting, the minutes released on Wednesday night, with Mr Warsh in charge for the first time, there will not be a rate hike.  So it’s no change all round between Europe, the US, and the UK,

NVIDIA produced the numbers, the market forecast, margins were maintained, ongoing data centre demand driving revenue and profits, as expected. The stock slipped back a tad as commentators expressed concerns of increased competition. With the margins Nvidia currently enjoys, that’s inevitable.

Coming to another subject making the news, SpaceX’s IPO is likely to be the first of three potential mega offerings this year, with OpenAI and Anthropic also likely to come to the public market. Potentially adding $3trn of market cap to the US market, which, without adding any earnings, as these businesses do not make money. Strategists already highlight the elevated market valuations; these additions could raise the trailing S&P 500 PE to almost 30x, according to Absolute Strategy Research. They go on to add there could be around $210 bn of fresh equity raised on the US equity market this year. As we read in the press, the Middle East conflict risks the world running low on fuel. With big tech share buybacks declining due to AI investment, new demands on capital, higher bond yields, and investors already well invested; one has to question whether the equity market fuel tank may start to run a tad low.