Trading Day-AI euphoria back with a bang

On the other side of the Atlantic, US President Donald Trump's approval rating has sunk to a career low of 32%, according to a new Reuters/Ipsos poll. The high cost of living, including record-high diesel prices at the pump, and the unpopularity of the Iran war, now in its seventh month with little sign of an end in sight, are beginning to bite. This is not what the Republican party wants with the November 3 midterm elections fast approaching. Rightly or wrongly, the midterms are often referendums on the sitting president. Voters appear to be feeling the downside of persistently elevated inflation and now record high diesel prices more than the positive "wealth effects" from record stock prices and record household net worth. **AI optimism strikes back** Monday's global equity rally underscored the ebb and flow of investor sentiment around AI. Today, it was overwhelmingly positive, sparking some huge one-day gains in big-cap tech names and lifting the Nasdaq to within 0.02% of the record high 27,190 points struck on June 1. The boom seemed to come out of nowhere. Perhaps Trump and Bessent helped soothe some of investors' concerns. The last few weeks had been dominated by the doomsday narrative that AI will be so powerful and destructive it could wipe out humanity within the decade. Exactly how that might unfold has not been made clear. What is clear, however, is Big Tech's commitment to keep spending, which investors had begun to fret over, but latched onto as a reason to buy on Monday. Will that spending generate the returns investors expect? Who knows. But that wasn't their concern today. Stocks roared higher on Monday, with the Nasdaq coming within 0.02% of June's record high, as the bullish AI narrative burst back into life, while investors also welcomed the fourth consecutive slide in global oil prices. If you have time, please dive into the big weekend read by my colleague Ron Bousso and me, on why record diesel prices could be Trump's Achilles' heel — the surge in prices threatens to push inflation much higher, and taming it will be an epic challenge. **Today's Key Market Moves** - **Stocks:** MSCI World +1.3%, biggest rise in six weeks. Europe +1%, UK +0.8%. S&P 500 +1.5%, Nasdaq +2.3% to within a whisker of new record highs. - **Sectors/shares:** Eight sectors on the S&P 500 rise, four fall. Tech +2.5%, comms services +4%, energy -2.6%. Chip stocks +4%. Intel +12%, Meta and Advanced Micro Devices +11%. Paramount Skydance -3%, Warner Bros +11%. - **FX:** Dollar rises, dollar/yen above 157.00. Chinese yuan strongest since January 2023. Bitcoin +6% through $86,000. - **Bonds:** French-German spread widest since 2012. US yields fall up to 4 bps, curves flatten further — 2s/30s down to 53 bps. - **Commodities/metals:** Oil dips below $100/bbl, Brent -4%, WTI -5%. But average US diesel nudges to new high $6.51/gallon. **European political risk** Worries over political risk in France, specifically around the public finances outlook, have stalked the French bond market for some time, but have ratcheted up in recent weeks. State elections in euro zone powerhouse Germany at the weekend have suddenly intensified and broadened investors' angst about the whole region's political direction. And, by extension, its debt and deficit trajectory. The 10-year French-German bond yield spread widened to 104 basis points on Friday, the highest since the white heat of the euro zone debt crisis in July 2012, only days before Mario Draghi's famous "whatever it takes" line changed the course of history. It held above 100 bps on Monday. The cost of insuring French bonds against default risk is the highest since 2020. Meanwhile, German Chancellor Friedrich Merz is clinging to power after his party's worst regional election defeat in postwar Germany, although the Bund yields fell on Monday thanks to the global oil price slide. Otherwise, German yields would probably be higher too.

Trading Day-AI euphoria back with a bang

Disapproval and AI optimism

Stocks rally as AI optimism returns

Market moves and European political risk

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