The US indices are still benefiting from their exposure to AI

Global equities have rebounded since the troughs in March of this year, following the US-Israel war on Iran and the subsequent surge in energy prices. Despite the Strait of Hormuz having been effectively closed for three months, investors remain optimistic about resolving the crisis, encouraged by Donald Trump’s social media posts suggesting that a peace deal is imminent. Meanwhile, in the US, meanwhile, political pressure is mounting in Congress to pass legislation blocking the war. 

Even after the Strait reopens, it will likely take months for the trade routes for energy and related commodities to normalise. There is also a risk that renewed hostilities and attacks on energy infrastructure could shake financial markets. However, markets tend to be forward-looking, so signs of progress in peace negotiations will likely help to boost the equity markets that are most adversely affected by changes in oil supply and pricing. Since the start of the war, European stocks have markedly underperformed their US peers, with the EURO STOXX 50 falling slightly, while the S&P 500 and NASDAQ have gained between 10 and 20 per cent in local currencies. The US is arguably less vulnerable to high oil prices as it is a net exporter. Furthermore, US equity markets have continued to benefit from the surge in semiconductor demand following the AI investment boom.

The largest weightings in the Euro Stoxx 50 include ASML, a leading supplier of advanced equipment to major chipmakers; LVMH, a luxury good giant; TotalEnergies, an energy group; and SAP, a giant in the enterprise resource planning (ERP) software industry.  Despite the underwhelming performance of shares in companies such as SAP and LVMH, the index is currently showing positive trends. Last week, the STOXX 50 broke out of a period of price consolidation by advancing above its previous three-month high of around 6,060–6,070. However, in recent days, it appears to be retesting these breakout levels. If these levels hold, further gains are feasible, potentially reaching the pre-war level of around 6,200. Conversely, there is a potential downside to around 5,900 if support fails, for instance if there is an adverse development in the Middle East.  

Aside from the ongoing peace negotiations between the US and Iran, which also involve Israel's occupation of southern Lebanon, the most important issue is the US nonfarm payrolls report, due on Friday 5 June. The consensus expectation is for 95,000 new jobs,to be created, which is a low figure by historical comparison.

On Wednesday 3 June, the Swedish retail company Clas Ohlson will release an interim report and host a capital markets meeting. Interim reports are also expected from Inditex, a major competitor of the Swedish fashion retailer H&M, and from the US-based semiconductor company Broadcom later in the day. Volvo Cars will present its car sales figures for the period from March to May. In terms of macroeconomic news, Wednesday will be dominated by the services purchasing managers' index for May from China, Sweden, Spain, Italy, France, Germany, the Eurozone, the UK and the US. We will also receive the producer price index for April from the Eurozone. Alongside the aforementioned services PMI in the US, ADP private employment figures for May, industrial orders for April, weekly oil inventory statistics from the Department of Energy, and the Fed's Beige Book are expected.

On Thursday 4 June, American Toro will release an interim report. Norwegian will publish its May traffic figures. Turning to macro news, we start with Sweden's CPI in May. This will be followed by Eurozone retail sales in April. The US will contribute data on productivity for Q1 and weekly jobless claims.

Friday, June 5, is Denmark's National Day, so the Copenhagen Stock Exchange will be closed for trading. Turning to the macroeconomic statistics, Japan's household consumption in April and India's interest rate announcement will be released. Next are Sweden's current account balance for the first quarter, France's industrial production for April and the Eurozone's GDP for the first quarter. The most important figure of the week comes from the U.S. in the form of nonfarm payrolls for May (see the monthly five-year chart below).

The rally in the S&P 500 remains strong, although the concentration of earnings remains a key issue. The index has been driven disproportionately by its largest technology companies, shifting from pure AI speculation towards tangible enterprise revenues, real infrastructure rollouts and improved corporate productivity. Additionally, stabilising interest rates and a robust US macroeconomic landscape have bolstered market confidence. From a technical perspective, momentum remains strong, with the index supported by rising EMAs (9 and 20). While the RSI has moved back into overbought territory, this should not be treated as a sell signal in isolation.

The performance of the NASDAQ 100 has been underpinned by monetisation across the generative AI stack. This has been led by a surge in capital expenditure (capex) across hardware, cloud infrastructure, and semiconductors. There are also early signs that enterprise software revenues are beginning to increase. With long-term yields having stabilised, the headwind from the discount rate has eased. Following a period of aggressive cost-cutting, large-cap tech companies have achieved strong operating leverage and record-breaking cash flow. Once again, the index is finding support from below, at the rising 9-day exponential moving average (EMA) and 20-day moving average, with the relative strength index (RSI)reaching overbought levels.

Once again, the German DAX is once again lagging behind the S&P 500, despite having no significant tech or AI exposure. That said, it has benefited from a stronger global manufacturing cycle, faster Eurozone disinflation and stabilising gas and power prices. However, as the chart below shows, this has not been enough to push the index to new highs. Nevertheless, momentum remains strong, with the rising 9-day exponential moving average (EMA) and 20-day moving average providing initialsupport in the event of a pullback.

In Sweden, the OMXS30 is consolidating but is still being supported by rising MAs (20 and 100). For the index to retest the late-February highs, a break above 3,190 is needed.

EMA 9: 9-day exponential moving average

Fibonacci: There are several Fibonacci lines used in technical analysis. Fibonacci numbers are a sequence in which each successive number is the sum of the two previous numbers.

MA20: 20-day moving average

MA50: 50-day moving average

MA100: 100-day moving average

MA200: 200-day moving average

MACD: Moving average convergence divergence