ANALYSIS: Global stock markets stepped back from record highs last week, with declines led by the technology sector. The Nasdaq fell 4.1%, while the Dow Jones held up better, easing 1.2% over the week. The broader S&P 500 declined 1.6%, but remains just 2.4% below its record high set the previous week. In Europe, the Stoxx 50 was 1.7% lower, while the FTSE100 eased only 0.4% after the Bank of England left interest rates unchanged. Asian markets were mixed - the Hang Seng gained 1.3%, but the Nikkei fell 4.1% following a strong run over the past month and throughout 2025 more broadly.
The US federal government shutdown has now entered its 40th day - the longest in history, although a solution may be at hand. Markets have so far shown resilience to the political impasse, but American consumers are beginning to feel the strain. The University of Michigan’s November survey reported a 6% decline in overall consumer sentiment, led by a 17% drop in current personal finances and an 11% fall in year-ahead business expectations. The weakness was widespread across most income groups, with one notable exception: consumers in the top third of stockholders saw sentiment rise 11%. Confidence overall remains near record lows, but those with significant investment portfolios are in notably better spirits.
There may soon be some relief for consumers worried about the prolonged shutdown. The Senate is expected to vote on Friday to advance a House-passed stopgap funding measure, potentially paving the way for a temporary resolution to the deadlock.
There hasn’t been a lot of official data out over the past month due to the shutdown (we may get October CPI data this week), which has meant extra attention on releases from the private sector.
Corporate America, as evidenced by the earnings season, is in good shape. To date, 83% of the 424 S&P 500 companies that have reported third-quarter results so far have beaten earnings expectations, on pace for the highest rate since the second quarter of 2021.
There have been some fresh concerns around the AI narrative after it was revealed that contrarian Michael Burry’s hedge fund Scion Asset Management had made bets against two high flying tech names, purchasing 5 million “put” options against AI data analytics company Palantir, and 1 million puts on Nvidia.
Burry was famed for making a huge bet against the US housing market during the credit bubble in the mid-2000s. His prescient bet against mortgage-backed securities before the GFC was chronicled in the book “The Big Short” and the Oscar-winning film of the same name.
In terms of the wide concept about history repeating, there are some fairly obvious differences between then and now. During the housing bubble, banks flooded the market with cheap credit, offering subprime mortgages to borrowers who arguably couldn’t afford them. Those loans were bundled into mortgage-backed securities which ultimately become financial kryptonite as interest rates rose, and defaults soared, which led to a systemic collapse when the music stopped. At its core the leverage was effectively built on bad debt.
The AI boom is being driven by equity investment and technological optimism, not household or banking debt. Capital is flowing into chips, data centres, and AI startups at record levels. However, while there are clear elements of frothiness, many of the names are delivering, and arguably living up to their valuation. AI excitement is being built on future expectations, not leverage.
Back to Burry, he first started going negative on AI names in early 2023, a trade he later admitted was off the mark. More recently it would appear he is being very selective in targeting Palantir (which is on a forward PE of 200 times) and Nvidia.
The distinction is important, as not all mega-cap tech names are moving in unison. While the Nasdaq was lower last week, there were tech stocks that were going the other way.
Micron Technology for instance was up over 6% last week. The semiconductor firm’s shares soared over 30% in October, as quarterly numbers showed that demand for high-performance memory chips tied to AI infrastructure continued to accelerate. Micron is a global leader in DRAM and NAND flash memory, supplying critical components for data centres. Revenues were up 46% year-on-year to a record US$11.3 billion. Micron has more than doubled this year.
Tesla’s AGM was certainly a notable one. The company has awarded Elon Musk a US$1 trillion pay package, with a comprehensive 75% of the votes cast backing the largest corporate pay package in history.
Under the deal, the world’s richest man has been set a series of stretching goals for the next decade, this includes Tesla delivering 20 million vehicles per year (10 times what the company does currently), 1 million robot taxis (from zero currently), selling 1m robots (from zero currently) and having 10 million Full Self-Driving subscriptions (versus a few hundred thousand users now). Tesla would also need to lift annual core profits to around US $400 billion, up from approximately US $7 billion last year.
Tesla stock will also need to rise. Currently valued at around US$1.4trn, it needs to increase initially to US$2trn before eventually reaching US$8.5trn. If he hits all of his KPIs, Musk would eligible for 12% of stock, which would take his total holding to around 25%.
Obviously there has been some institutional disquiet on the package but Musk had threatened to quit, and this long-term package should secure his attention, plus if he delivers, shareholders will be big winners, one would think.
Musk also by the way believes humanity will be “a huge winner” from his Optimus Robots. He claims they will increase the world economy by a factor of 10, that jobs will no longer exist with everyone paid a universal income and in the process this would eliminate world poverty. Lofty goals. In the meantime the company will be hoping it can reverse declining sales outside of the US.
This week there may not be a lot of data but there will certainly be some earnings numbers to captivate attention. Results are due from Rocket Lab as well as Disney, Cisco, Tencent, and Sony, amongst others.
There was meanwhile some positive news out on Asia over the weekend. Consumer prices in China rose 0.2% in October from a year ago, more than expectations for zero growth, and rising from the 0.3% decline in September. It was their first increase in consumer inflation since June and the fastest pace since January.
The Australian market closed down 1.3% last week. The RBA held rates on Melbourne Cup Day and investors are now dialling back the prospect of reductions in 2026. This follows hotter than expected quarterly inflation data for September, with consumer prices rising at 3%. Jobs data is out this week with the unemployment rate expected to ease to 4.4%.
Today ANZ has reported a 14% fall in cash profit to A$5.8 billion, revenues rose 8% to A$22.19 billion but the bottom line was weighed by A$1.1 billion of impairments and other previously declared one-off items. The bank held its final dividend. In New Zealand ANZ saw cash profit rise 4% to $2.4 billion, with net interest margins edging up to 2.6%.
The kiwi market outperformed many global indices, with the NZX50 rising 0.3% for the week. The unemployment rate increased to 5.3% in the September 2025 quarter, up from 5.2% three months earlier. That was in line with RBNZ forecasts but the highest since the December 2016 quarter.
The jobless print has strengthened the case for another 0.25% rate cut by the RBNZ at the end of this month. Some parts of the economy are doing ok (e.g. tourism) but others are in need of a boost. Briscoes noted at its update on Friday that the retail environment remains difficult, with households still cautious and discretionary spending under pressure. MD Rod Duke said lower rates have yet to see a material upswing in the consumer. For the 13 weeks to October 26, Briscoe’s total group sales fell 1.8% to $171 million.
The dairy sector meanwhile saw another weak auction last week (prices have fallen in 10 of the past 12), but many of our exporters will be getting a tailwind from the currency. The kiwi dollar has fallen to Liberation Day levels against the US$, a 10-year low against the British Pound, a 16-year low against the euro, and a 12-year low against the Aussie dollar.
Investors are also pricing-in the improved prospects for some cyclical firms of lower interest rates. Shares in Fletchers rose 7% last week and are now up 20% year to date. Building consents are on the mend, rising 7.2% in September, after rising 6.1% in August.
Another strong performer last week was Oceania Healthcare which gained 4%. Shares in the retirement care provider were a standout performer in October, surging 15%. The care home reported a 58% lift in applications in the first half of FY26 compared to the prior period, reflecting the benefits of recent pricing, marketing, and sales initiatives.
This week we have card transaction and manufacturing data here. On the earnings front half year numbers are due from Mainfreight, and Infratil.