1. Earnings are proving to be a support for the market.

80% of companies have now reported Q1 results, where overall EPS growth is at +23% y/y in the US, and +3% y/y in Europe. The better-than-expected earnings delivery has led to a sharp upgrade in the S&P500 blended Q1 EPS estimate. In addition, the percentage of companies beating EPS estimates is up in both the US and in Europe. US is recording a strong positive surprise factor of 18% pts, with Europe also positive at 2% pts.

Below: The S&P500 blended Q1 ‘2e EPS has moved up sharply, from $70.1 at the lows in Jan, to $74.7 currently.

2. Has buying a chart like this ever worked out?

In the short term anything can happen and it can go higher, but longer term, history is not on this chart’s side.
This is the semiconductor index.

3. Time to invest in defense?

European aerospace and defense stocks were falling again on Monday and are down about 13% since the U.S. launched its attack on Iran in late February.
Companies such as BAE Systems, Leonardo and Thales are down over 10%, while Germany's Rheinmetall has dropped almost 30% since the war began.
The sector has been inversely correlated to energy prices, with investors viewing that higher oil & gas could require a fiscal response, and potentially delay defense procurement in Europe.
Are investors right to be cautious?
Barclays says it's fair to be wary of the delay risks, but so far has seen no evidence that this could impact the structural investment case in the sector, particularly the German companies.
The company continues to favour Rheinmetall and Leonardo post first-quarter earnings, with both names trading at a discount to the wider sector.

4. China stocks hit 11-year high on AI optimism and export strength.

China’s leading Internet companies are accelerating investments across the entire AI value chain, with a growing emphasis on developing proprietary AI chips. This shift reflects rising geopolitical constraints on advanced semiconductor imports and the increasing strategic importance of computing power for large language models. Ownership of the full AI stack – chips, cloud infrastructure, models, and applications – will differentiate long-term AI winners from laggards. Companies capable of integrating these layers internally can optimize performance, lower costs, and mitigate regulatory or supply-chain risks. Alibaba ticks all the boxes.
Investors are also watching the upcoming meeting between U.S. President Donald Trump and Chinese President Xi Jinping, where Iran, Taiwan, and artificial intelligence are set to be discussed.

5. Broad‑based nature of AI substitution risk exacerbating deflationary pressures in China.

Against a backdrop of weak corporate earnings, firms in China may be more inclined to substitute labor with AI to protect margins, potentially leading to faster job displacement than job creation over the next 2-3 years. This risk is amplified by the broad‑based nature of AI‑driven substitution: GenAI is displacing junior white‑collar work (exacerbating the already elevated youth unemployment), agentic AI is beginning to encroach on mid‑level professional roles (adding pressures to the already stressed middle-income group), and physical AI – from drones to humanoid robots and autonomous vehicles – threatens parts of labor‑intensive service jobs, the main absorber of employment losses in recent years. If not managed properly, these dynamics could reinforce deflationary pressures, weigh on corporate profitability, and ultimately constrain resources available for AI innovation.

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