The Monday Report – 25 May 2026

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This story features FISHER & PAYKEL HEALTHCARE CORPORATION LIMITED, and other companies.
For more info SHARE ANALYSIS: FPH
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

US markets edged higher on Friday, led by the Dow Jones which rose 0.58% ahead of the Memorial Day holiday on Monday.

Peace talks with Iran remain the central issue.

ASX200 futures are pointing to a weak start after a 0.3% gain last week, with all eyes lilely to be focused on Wednesday's April CPI print and ongoing corporate earnings and updates.

Good Morning,

The ASX200 finished 26 points, up 0.30% higher last week at 8657.  

After last week’s softer than expected employment report, attention will focus on Wednesday’s inflation update for April.

 Last month’s CPI data saw headline inflation rise to 4.6% year-on-year in the 12 months to March 2026 — the highest reading since September 2023. Housing, which is the highest weighted group in the CPI, was the largest contributor to annual inflation with a rise of 6.5%.

This was followed by an 8.9% rise in Transport, where automotive fuel prices surged 32.8% from February to March — the largest monthly increase since the series began in 2017.

The RBA’s preferred inflation measure —the trimmed mean— held steady at 3.3%, well above the Bank’s 2%–3% target midpoint.

The RBA responded just days later by lifting the cash rate 25 basis points to 4.35%, its third consecutive 25bp rate hike.

In the statement, the Board sounded hawkish noting that developments in the Middle East were already adding to inflation and warned of potential second-round effects. 

At this point, the markets expect headline inflation to ease to 4.4% YoY in April, with the trimmed mean likely to nudge higher to 3.4%.

An outcome in line with this, combined with this week’s softer labour force report, should see the RBA keep rates on hold at 4.35% when it meets next month. 

The Australian rates market starts the week pricing in 3bp of rate hikes for June and a total of 29bp of hikes for the duration of 2026. 

Source: Tony Sycamore, IG 

It is another big week for earnings reports, investor briefings and AGMs with Fisher & Paykel Healthcare ((FPH)) due to report tomorrow.

Our calendar did mention the scheduled release one day early, for which our apologies.

For more details see https://fnarena.com/index.php/financial-news/calendar/

And to stay up to date on earnings season, check out the Corporate Results Monitor:

https://fnarena.com/index.php/reporting_season/

Today’s Big Picture, J.L. Bernstein

Diplomats Chase Peace In Iran 

A Qatari team flew into Tehran on Friday in coordination with the US to try to secure a deal.

Traders are buying stocks on hopes that the Strait of Hormuz will reopen.

Goldman Sachs says global crude stockpiles are shrinking at a record pace.

A deal would take real pressure off gas prices, but Iran insists on keeping its enriched uranium, and that makes a quick resolution harder.

Quantum Gets US$2 Billion In Government Backing 

The Commerce Department awarded US$2 billion in grants to nine domestic quantum computing companies.

IBM landed the biggest grant at US$1 billion and will match it with US$1 billion of its own to build the first dedicated quantum chip foundry in Albany, New York.

France followed a day later with US$1.16 billion of its own. This is an arms race now.

Consumer Gloom Deepens

Gas prices hit US$4.55 a gallon right before Memorial Day weekend.

The Michigan sentiment reading fell to 44.8, a new all-time low, below even the 2022 trough.

Lower-income households and people without college degrees took the biggest hit.

Record stock market. Record-low consumer confidence. Something has to give.

NAB Markets Today, extract

Donald Trump on Saturday afternoon claimed an agreement to permanently end the war in Iran and reopen the Strait of Hormuz had “largely been negotiated” and “would be announced shortly”. 

In a post to his Truth Social account, the US president said he had concluded a “very good call” with leaders of Gulf countries and other US allies in the Middle East.

He said he had a separate call with Israeli Prime Minister Benjamin Netanyahu that had also gone “very well”.

“Final aspects and details of the deal are currently being discussed, and will be announced shortly,” Trump wrote. “In addition to many other elements of the agreement, the Strait of Hormuz will be opened.” (FT reporting).

Iran’s immediate official response to the Trump post was more measured, saying that negotiations were progressing but denying there was a deal on re-opening the strait. 

Trump later said he has told US negotiators “not to rush into a deal” with Iran that would lead to the reopening of the Strait of Hormuz, saying “both sides must take their time and get it right”.

Writing in The Australian this morning, Cameron Stewart says “both sides appear to have abandoned some of the unrealistic demands that have impeded progress towards peace during this almost three-month conflict. On the Iranian side, as far as we can discern, Tehran no longer appears to be demanding reparations for war damage or sovereignty of the Strait of Hormuz or even a permanent toll system for international shipping passing through there.

“On the US side, Washington seems to have quietly dropped demands that Iran severely curtail its ballistic missile program and cut all assistance to its terror proxies”.

As for Friday’s markets, a lecture delivered in Frankfurt Friday by Fed Governor Christopher Waller was market moving. He said that as the conflict in the Middle East stretches on, higher costs for oil and other commodities are increasingly likely to ripple through the economy in a broader wave of sustained inflation.

As a result, he said, it is time for the Fed to stop signalling that another rate cut is its most likely next move. For the foreseeable future, holding rates steady in the current range of 3.5% to 3.75% will likely be the right course, Waller said.

“I can no longer rule out rate hikes further down the road if inflation does not abate soon,” he added. “It may be easy to look through a single price shock such as tariffs, but it may be more risky to look through a series of positive price shocks,” Waller said. (Dow Jones reporting)

Also market moving, Friday’s standout data release was a surprisingly big fall in the University of Michigan’s final consumer sentiment survey compared to the preliminary release, to 44.8 from the 48.2 (48.2 expected) accompanied by a big jump in the 5-10 year inflation expectations reading, to 3.9% from the preliminary 3.4% (1-year to 4.8% from 4.5%).

The 44.8 sentiment reading is a new record low, surpassing the 50.0 prior low recorded in June 2022 (the early months of the Russia-Ukraine war, when oil prices were above US$120).

Kevin Warsh was sworn into office Friday in a White House ceremony as the 17th chair of the Fed. During the swearing in ceremony, President Trump said “I want Kevin to be totally independent. I want him to be independent and just do a great job. Don’t look at me, don’t look at anybody, just do your own thing and do a great job”.

Treasury Secretary Bessent, asked if Warsh would cut rates, said “He will do the right thing”. Warsh said he would lead a reform-oriented Fed and that with ‘independence and resolve’ inflation can be lower and that the ‘coming years can bring unmatched prosperity’.

In Europe, three ECB Governing Council members (Stournaras, Muller and Demarco) signalled the likelihood of a June rate hike (‘Maybe inevitable to keep credibility’ Stournaras said).

Yet in the last half an hour, ECB chief Lagarde has been out saying the situation is too uncertain to commit on rates already, while admitting inflation projections were likely to be revised next month (presumably up).

Bond markets Friday saw front-end US treasuries react strongly to first the Waller comments then shortly after the University of Michigan survey, 2s from 4.06% to 4.14% before finishing the day at 4.12%, up 4bps.

The curve twisted around the 7-year point, 10s down 1.3bps and the 30-year -2.8bps. On the week, 2s are up 5bps 10s down 3.5bps and the 30-year -5.3bps. Money Market pricing now has 24bps of hikes priced by December (28bps by January).

Earlier Friday European 10-year benchmarks ended the days 6-7bps lower and Aussie 10s finished the Sydney day 4bps lower. In a week dominated locally by the reported rise in the unemployment rate from 4.3% to 4.5%, 3 year futures saw the implied yield fall -17.5bps and the 10-year down -15.5bps.

In commodities, last week’s fall back in oil prices (-8.4% for WTI and -5.2% for Brent crude will presumably extend at Monday’s open.

All commodities bar gold were firmer Friday led by a 1.35% gain for copper, while on the week, weaker oil contrasted with strength for all industrial metals save iron ore, latter down -2.7%.

Gold fell -0.4% Friday and -0.85% on the week.

FOMO vs FEMO (Fabulous Earnings Momentum), Ed Yardeni & Toby Hearst

The stock market has had an exuberant stretch since the S&P500 bottomed on March 30. The index is up 17.8% since then through Friday, after hitting a record high on May 14.

The DJIA rose to a record high this past Friday. The bears say the exuberance is irrational, driven by lots of excitement about AI. We say it is rational, based on our Buzz Lightyear Theory (BLT) of “To Infinity and Beyond!” 

According to our BLT, there’s a fourth factor or production, not just the historically recognized three. In addition to land, labor, and capital, which are relatively scarce, there’s now data, the supply of which is unlimited. 

The Digital Revolution, which began in the 1960s, is all about processing as much information as possible, as quickly as possible and as cheaply as possible. Today’s AI technologies can certainly do all that much better than IBM mainframes back in the mid-1960s.

Instead of focusing on rational versus irrational exuberance, let’s compare FOMO to FEMO. The former stands for “Fear Of Missing Out.” 

Investors pile into stocks, bidding up their price-to-earnings multiples. FEMO is “Fabulous Earnings Momentum.” Analysts raise their earnings estimates because hard data and company guidance give them reason to do so.

We would rather see FEMO than FOMO every time.

This year has been all about FEMO. Through Friday, the S&P500 is up 9.2% ytd, forward earnings is up 14.4%, and the forward P/E is down -4.6%.

The entire rally has been driven by forward earnings. The multiple has contracted. FOMO inflates the P/E. This market did the opposite. That is why we are not in the bubble camp.

FOMO is based on hope and hype. FEMO is based on fundamentals. At 21.1 times forward earnings, the S&P500 is not irrationally valued unless a recession is coming in the foreseeable future.

We don’t see one.

Now consider the following:

(1) Record forward earnings. The S&P500’s forward EPS rose further to a record US$358.82 last week. The 2026 and 2027 consensus earnings estimates are both at new highs of US$337.11 and US$390.86, respectively. Analysts keep raising their estimates as the AI compute buildout struggles to keep pace with the exploding demand for processing ever more data.

Forward earnings is a leading indicator of the actual quarterly earnings of the S&P500. We have rarely seen forward earnings rise so quickly at this stage of an earnings cycle. That’s FEMO.

(2) Record profit margins. Profit margins have been on fire since mid-2023, approximately seven months after ChatGPT was released. The forward profit margin reached a record 15.5% last week, and the current 2027 consensus margin is 16.1%, up from 14.8% currently this year. This is consistent with the productivity gains at the heart of our Roaring 2020s narrative.

(3) Broadening earnings breadth. Across the S&P500, 85.6% of companies report rising forward earnings, and 89.0% report rising forward revenues, both on a y/y basis. That’s more FEMO.

(4) Mag-7 vs Impressive 493. FEMO has been led by the Mag-7 since ChatGPT was released in late 2022. Their combined forward earnings has increased sharply since mid-2023. There is one caveat: A few of these companies booked mark-to-market gains on their AI investments in Q1-2026, which boosted reported earnings. Strip those out, and the underlying growth rate remains solid. Meanwhile, the forward earnings of the Impressive 493 has also been rising faster in recent months, to record-high territory.

(5) FEMO and LTEG. Fabulous Earnings Momentum has been driven by the rising consensus of long-term earnings growth (LTEG) expectations of industry analysts. Information Technology alone is the biggest contributor to the S&P500’s LTEG. It is the only sector above the S&P500’s LTEG, at 34.9% versus the index’s 21.9%.

That 34.9% is a record high, above its dot-com peak. Information Technology’s growth expectations may be bordering on irrational, and we flag it. But this is analysts raising LTEG, not investors bidding up stock prices. Optimistic earnings forecasts get revised. They do not crash the market the way that a stretched valuation multiple can.

(6) Valuation and FOMO. The multiple is where FOMO resides, but it is nowhere to be found. The S&P500 trades at 21.1 times forward earnings per share, and the Information Technology sector at 24.4. In 2000, the multiple ran up while earnings lagged behind. This year, it is the reverse: Earnings is doing the running, and the multiple has backtracked. That is the better setup. That is FEMO, not FOMO.

(7) Case study. Semiconductors make the case. The industry’s share of Information Technology’s forward earnings has risen to 46.9%, only slightly above its 45.1% share of the sector’s market cap. The market is signaling that semiconductor makers are growth companies, not the cyclicals they once were. That conviction would normally inflate their stocks’ P/E multiples. It hasn’t. The rally in the semis has been led by E, not P/E. That is FEMO, not FOMO.

Front One – Superintelligence: The Layer Everyone Sees, J.L.Bernstein

This is the headline race. Models. Algorithms. The thing people mean when they say “AI.”

Here, the U.S. is genuinely in front. Anthropic just published a 5,500-word manifesto on how to conduct the AI Cold War with China; the kind of document RAND used to write about nuclear strategy in 1958.

Dario Amodei has been explicit that the survival of democracy depends on who wins. The State Department spent last week at APEC actively pushing American AI products into Asian markets to head off Chinese alternatives, with a senior official telling CNBC there is “pressure to distribute American compute globally.”

The math at the top of the stack supports the framing. Anthropic last valued at US$380bn with reports of a US$900bn round in motion.

OpenAI at US$852bn with US$1T projections circulating.

Berkshire just took its Google stake up 224%, about US$20bn of new buying likely because of Alphabet’s combined Search/YouTube/Android moat plus its 14% Anthropic stake and 8% of SpaceX.

The closest Chinese equivalents DeepSeek, Alibaba’s Qwen, Moonshot are good and improving fast, but they don’t carry trillion-dollar valuations and they aren’t backed by the same depth of private capital.

There’s also the soft layer of this front, which doesn’t usually get scored but should. Every major Western model ChatGPT, Claude, Gemini, Grok was trained partly on Chinese language data scraped from the open web.

The peer reviewed work in Nature last week showed that on politically sensitive prompts in Chinese, every commercial chatbot answered noticeably more favorably to Beijing than it did in English.

That’s not espionage. It’s just that Xinhua and People’s Daily don’t paywall, and the Wall Street Journal does. The free web is a one way mirror.

Score on the model layer itself: USA, clearly. Score on whose worldview is in the training data: more complicated than anyone wants to admit.

Front Two – AI Infrastructure: The Chips and the Capex

This is the layer right under the models. Compute. Chips. Data centers. Capex.

Here it gets murkier.

Nvidia at US$5.46 trillion is now larger than the GDP of every country on Earth except three. If it were a country, it would be the fourth largest economy in the world. Hyperscaler capex hits US$755bn in 2026 according to Goldman, up 83% year over year, with Microsoft at US$190bn, Amazon at US$200bn, and Alphabet and Meta each at US$125bn-US$190bn.

The Magnificent Seven issued US$134bn in bonds already this year vs. US$87.5bn in all of 2025 to fund it. Buybacks at the same names dropped -64% in Q1 to make room for capex. The trade is enormous, the moats are real, and the supply chain runs heavily through American design and Taiwanese fab.

But the cracks are visible.

China was supposed to be a year behind on chip design. The actual gap is closer to six months. The chip waivers debate in Washington is now a real fight. Trump’s tech delegation to Beijing included Tim Cook, Jensen Huang, and Elon Musk specifically because the administration is wavering on whether to let advanced Nvidia chips into China at all.

Huang’s argument: if you don’t sell them, they’ll build their own and beat you anyway. The other side: every chip you sell is one less you have for the domestic buildout.

And the harder problem is that even where the U.S. wins on design, it loses on physical buildout. Transformer lead times in the U.S. are 3-5 years. Gas turbines, 7-8 years. The U.S. imported 8,000 transformers from China in 2025 alone.

About half of planned 2026 U.S. data centers may be delayed because the grid equipment can’t get there in time. Fiber lead times are 12-plus months and Meta locked up US$6bn with Corning just to secure supply.

You can have the best chip in the world and still not be able to build the data center.

Score: USA, but the margin is shrinking and a meaningful slice of the physical inputs aren’t American.

Corporate news in Australia:

• Tuas ((TUA)) abandons proposed $1.6bn takeover of M1 following Singapore regulatory scrutiny over Simba spectrum compliance concerns

• Codan ((CDA)) acquires US engineering group Adaptive Dynamics to expand unmanned systems and electronic warfare capabilities

• KKR’s planned $2bn sale of UP Education faces uncertainty amid weak buyer appetite

• Woodside Energy ((WDS)) moves to block Inpex by pursuing PetroChina’s Browse stake in strategic LNG manoeuvre

• Matt Latimore advances bid to acquire Whyalla steelworks

• Ravenswood gold mine expected to be marketed for sale in 2026-2027 once operational and financial performance stabilises

• Bain Capital agrees to sell Estia Health to Stonepeak in a $2.5bn transaction

• Real Pet Food Group sale process struggles as high vendor price expectations deter private equity interest including Blackstone and Bain

• Permira sells I-MED to Jardine Matheson for $3.4bn, shelving IPO plans

• Gina Rinehart backs Arafura Rare Earths’ ((ARU)) $375m capital raising

• Tanda founders seek private equity partner in deal that could value the workforce software business at more than $500m

On the calendar today:

-UK, US Public Holiday

-ARISTOCRAT LEISURE LIMITED ((ALL)) ex-div 50c

-DALRYMPLE BAY INFRASTRUCTURE LIMITED ((DBI)) ex-div 6.75c

-EMBARK EARLY EDUCATION LIMITED ((EVO)) ex-div 1.50c (100%)

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

The Australian share market over the past thirty days…

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

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