Greg Smith is the head of retail at Devon Funds www.devonfunds.co.nz and a regular opinion contributor.

OPINION: European markets pushed higher on Friday, while the US indices edged lower, but had a strong week. A closely watched survey of consumer confidence showed that American consumers are feeling more upbeat about the outlook, in part on the view that inflation is being brought under control. The S&P500 edged back 0.3% on Friday but finished the week 2.6% higher. It was the fifth positive week in a row for the benchmark, which is firmly in the bull market territory, having risen more than 20% from last year’s lows.

The week ahead will see a focus on Fed Chair Jerome Powell again, who is testifying before the Senate on the state of US monetary policy, and in the wake of the Fed’s decision to pause rates. Meanwhile, the Bank of England is due to make its own rate decision, with UK officials likely to follow their European counterparts in raising rates further.

The University of Michigan Survey of Consumers came in at 63.9, higher than estimates of 60.2 and up from 59.2. May. With a reading below 100, it shows that pessimists still outnumber optimists, and overall confidence is fragile. But the situation is getting better – sentiment is now around 30% above its historic lows of a year ago.

A lot of this has to do with an improved outlook for inflation which tumbled in June. US consumer inflation expectations have fallen sharply, with the one-year outlook declining to 3.3% from 4.2% in May. That’s the lowest level since March 2021.

This comes as the rate of inflation in the US, and indeed many other countries globally has started to fall away from very high levels. This is good news for consumers who have been battling cost of living pressures and may also potentially make it easier for the Fed (which pushed the pause button last week) and others to end their interest rate tightening programs.

US consumers still acknowledge there are some challenges ahead but clearly think things are going to pan out better than once feared. The survey showed that consumers’ view of the outlook had improved by nearly 30% in the short term, while up nearly 15% over the long term. With the consumer a big driver of the world’s largest economy, confidence is a good thing, and with inflation also coming down and interest rate tightening coming to an end, it increases the chance of a soft economic landing scenario.

Technology stocks had a good week, including Adobe which rallied 7% after beating revenues and earnings forecasts in the latest quarter. The company also raised its forecast for the next quarter and full year. Adobe is also in Artificial Intelligence mode, with the technology used heavily in its Firefly software. The company’s chief executive said that the generative AI design software would boost productivity, but he also said that AI would “augment” human ingenuity, not replace it.

Technology is finding its way increasingly into everyday life. Shares of iRobot jumped 20% after the UK competition regulator approved Amazon’s US$1.7b acquisition of the Roomba self-cleaning, robotic vacuum cleaner. Regulators in Europe and the US are yet to approve the deal.

Shares in Virgin Galactic Holdings soared as much as 40% before closing 17% higher. This was as the space tourism firm, founded by Richard Branson, announced that its long-awaited commercial spaceflight service would launch next week. The first spaceflight, called Galactic 01, is planned between June 27 and June 30. Galactic 02 will follow in early August, with monthly spaceflights expected thereafter.

Shares of Virgin Galactic lost over two-thirds of their value last year due to delays in the company’s launch of commercial service as it had to upgrade its tourist spacecraft. But things are all sorted it seems. The first commercial mission will carry three crew members from the Italian Air Force and the National Research Council of Italy to conduct microgravity research.

After that, it’s on to “ordinary” passengers, some of whom signed up 10 years ago for the pleasure of a 90-minute jaunt into space, and to experience weightlessness and an aerial view of Earth. Virgin Galactic has sold about 800 tickets over the past decade, with the initial batch going for US$200,000 each. Fare inflation has also extended to space tourism, with the cost of a seat to go to the edge of space now running at a cool US$450,000.

Asian markets were higher across the board on Friday. The Nikkei (now up 30% year to date) rose 0.7% as the Bank of Japan kept monetary policy ultra-loose as expected. Officials kept the short-term interest rate target at -0.1% and made no changes to the yield curve control policy. Conditioned by decades of deflation, Japan is looking to ensure that inflation (at 3.5%) currently remains “sustainably” above the 2% level. Ultra-loose monetary policy has weakened the yen relative to other currencies, which is an economic tailwind for the export-led nation.

The Australian market rose again on Friday, for the fifth session in a row, with the ASX200 gaining 1.06% to close at 7251. The energy and gold sectors led the way, with gains of 3% or more. It capped off a week that saw the ASX200 gain 1.8%.

Energy stocks were buoyant generally, but AGL was the standout, surging nearly 10% after the electricity and gas supplier upgraded earnings for this financial year and next. Robust wholesale power prices and an improved operating performance at the company’s power plants are set to see core net profit to at least double next financial year.

In the currency markets the Aussie dollar hit a four-month high of US$0.69. The prospect of further stimulus measures in China has boosted sentiment. There is also a strong chance of another rate hike by the RBA just as the Fed is pausing. Markets are pricing in a near 70% chance of a 25bps hike on July 4. The minutes of the last RBA meeting is due tomorrow, which preceded last week’s blowout-jobs numbers.

There was strength across a number of the big blue chips last week, including Fisher & Paykel Healthcare, EBOS, and Mainfreight. Further down the boards, cinema software group Vista was up 18% over the five sessions.

Looking to the week ahead, we have the start of the Annual General Meeting season, with Argosy Property kicking things off tomorrow. The dairy sector will be in focus again with the latest GDT auction. With the news that NZ is in a technical recession, trade figures for May will take on added interest, as will credit card spending and consumer confidence prints