Weekly market wrap up

The IMF and World Bank Annual Meetings brought policymakers from around the world to Bangkok this week, with resilience once again the word doing plenty of heavy lifting. The IMF expects the global economy to grow 3.1% this year before picking up to 3.4% in 2027, although that headline masks an increasingly uneven picture. Sitting alongside the growth discussion was an increasingly uncomfortable fiscal one. Global public debt is expected to exceed 100% of GDP by 2030, while higher interest rates mean governments are paying more to service already elevated debt loads. The IMF’s message was relatively straightforward: rebuild fiscal buffers before markets force the issue. 

US inflation delivered another unwelcome surprise this week, rising to 3.7% in September from 3.4% in August, driven largely by higher energy costs. Core inflation also increased to 2.6%, reinforcing concerns that price pressures remain stubbornly above the Federal Reserve’s 2.0% target. The figures strengthened expectations of further interest rate hikes, unsettling equity markets. That unsettling was particularly evident in AI-related stocks, which were already facing questions over stretched valuations and substantial investment costs. 

Australia's AI boom hit a speed bump at the end of last week, after data centre developer Firmus abandoned what would have been the country's biggest stock market listing in nearly three decades. Backed by investors including Nvidia and Blackstone, Firmus was seeking to raise over A$7 billion on a $44 billion valuation, despite having just two operational data centres. Investor enthusiasm faded amid concerns over the ambitious valuation and substantial future funding requirements, with investment bankers reportedly halving the proposed share price before abandoning the listing altogether. The collapse highlights growing scrutiny of AI infrastructure valuations, where investment ambitions are running well ahead of actual earnings. 

Staying across the Tasman, Australia's labour market also took a hit, with employment falling by 39,300 in September against expectations of a 20,000 increase. Unemployment remained at 4.7%, its highest since the pandemic recovery. However, the underlying picture was less concerning, with part-time employment falling sharply while full-time positions actually increased. The figures do complicate matters for the Reserve Bank of Australia, which has already raised rates four times this year to tackle stubborn inflation.