Author: Fiona Craig

Mulberry Group plc (LSE:MUL) reported an 18% year-on-year increase in group sales for the 26 weeks ended 26 September 2026, with revenue growth across all geographic regions as the British luxury accessories company continued implementing its full-price sales strategy.

The company recorded like-for-like sales growth in key markets, alongside an increase in wholesale revenue. Trading was supported by demand for new and established handbag collections, while Mulberry also reported increased brand visibility following its Mulberry by Christopher Kane runway presentation at London Fashion Week.

Mulberry said it continued to limit promotional activity during the period, reducing the proportion of sales generated through discounting by 300 basis points. The approach forms part of its efforts to rebuild gross margins and increase the contribution from full-price sales.

International Markets and Wholesale Channels Contribute to Growth

The United States recorded particularly notable sales growth during the first half, supported by digital trading and the launch of Mulberry products through Bloomingdale’s Marketplace.

European operations also reported increased sales, while the Asia Pacific region achieved like-for-like growth.

Wholesale and third-party distribution channels expanded during the reporting period, accounting for 17% of total group sales. The company is developing these channels as part of its strategy to increase distribution in selected international markets.

Mulberry operates through its own retail stores, digital platforms, wholesale relationships and franchise partners, with products including its Bayswater and Lily handbag collections.

Reduced Promotional Activity Supports Margin Strategy

Mulberry continued implementing its “Back to the Mulberry Spirit” strategy, which focuses on product development, brand positioning and customer engagement.

A central element of the programme is reducing reliance on discounted sales while increasing full-price transactions. The company reported a 300-basis-point reduction in the proportion of promotional sales during the first half, consistent with its stated objective of rebuilding gross margins.

The strategy also includes developing new product collections, maintaining established handbag ranges and expanding distribution through selected retail partnerships.

Mulberry said customer engagement increased during the period, supported by product launches and marketing activity, including its London Fashion Week presentation.

Medium-Term Revenue and Profitability Targets Maintained

Mulberry continues to target annual revenue exceeding £200 million and an adjusted earnings before interest and tax (EBIT) margin of 15% over the medium term.

These objectives form part of the company’s broader plan to restore profitability through higher full-price sales, gross margin improvements and development of its international distribution network.

The group enters the second half of its financial year against what it described as a challenging macroeconomic environment.

Management identified its upcoming product pipeline, customer engagement initiatives and continued emphasis on full-price sales as priorities for the remainder of the year.

The company has not provided a specific timetable for achieving its medium-term revenue and adjusted EBIT margin targets in the supplied update.

Yardeni Research has revised its S&P 500 year-end forecast to 7,900 from 8,400, reflecting expectations that investor risk aversion will continue to affect equity valuation multiples.

The research firm left its 2027 earnings estimate unchanged at $425 per share, compared with a market consensus of $423.08, while reducing its year-end forward price-to-earnings target from 19.8 to 18.6.

The previous S&P 500 objective of 8,400 had been moved to mid-2027 before the latest revision.

Yardeni continues to forecast that the US economy will avoid recession through 2029, distinguishing its valuation concerns from its expectations for corporate profitability.

Valuation Assumptions Drive Revised Market Forecast

Yardeni said risk-averse market conditions, which emerged in mid-September, are likely to persist and could lead investors to assign lower earnings multiples to equities.

The firm maintained its expectations for corporate earnings but reduced the valuation it expects the market to apply to those profits.

This adjustment resulted in the lower year-end S&P 500 target.

Despite the revised forecast, Yardeni said a recovery towards 7,900 remains possible before the end of the year.

The firm also identified additional potential investment opportunities arising from lower equity valuations.

Semiconductor Losses Lead US Equity Market Declines

The S&P 500 declined 1.1% on Wednesday to close at 7,718.94.

The Nasdaq Composite and Russell 2000 both fell 1.9%, while the SOXX semiconductor exchange-traded fund recorded a 4.5% decline.

Yardeni attributed part of the change in technology-sector sentiment to increasing competition in artificial intelligence and uncertainty surrounding the financial returns on large-scale AI investment.

CoreWeave (NASDAQ:CRWV), a provider of cloud infrastructure for AI applications, recorded a 16% share-price decline amid concerns about its ability to service outstanding debt.

The firm cited these developments in its assessment of market conditions affecting technology-related valuations.

Consumer Inflation Increases 0.6% in September

September’s US consumer price index report showed a 0.6% monthly increase in headline inflation, the largest rise since March.

Energy prices increased 9.3%, accounting for part of the overall monthly advance.

The report prompted a change in market expectations for Federal Reserve interest rates.

The probability assigned to an October rate increase rose from 21% to 36%, after briefly reaching 45%. Market expectations also shifted towards the possibility of two interest rate increases before year-end.

Core inflation increased 0.3% during September.

Yardeni reported that 52% of consumer price index categories were experiencing annual price increases above 3%.

Durable goods prices advanced 0.9%, while computer and electronics prices recorded their highest three-month inflation rate on record.

The firm linked the increase in computer and electronics prices to semiconductor demand associated with artificial intelligence.

Bond Yields and Geopolitical Developments Influence Outlook

Yardeni said the 10-year US Treasury yield appeared to be stabilising, consistent with the firm’s expectations from the preceding weekend.

The research firm pointed to real yields of approximately 2.90% on Treasury Inflation-Protected Securities as a potential factor supporting demand in the bond market.

It also identified several risks that could affect equity valuations, including increased political partisanship following the US midterm elections and possible renewed escalation in the Middle East.

Yardeni expects these factors, alongside existing risk-averse sentiment, to contribute to continued pressure on market valuation multiples.

Nevertheless, the firm maintained its corporate earnings projections and its expectation that the US economy will avoid recession through 2029.

Its revised S&P 500 target reflects a reduction in valuation expectations rather than a change to its underlying earnings forecast.

Federal Reserve Chair Kevin Warsh said artificial intelligence has the potential to increase economic productivity over the medium term, while acknowledging that the transition could create challenges for businesses, workers and monetary policymakers.

Speaking on Friday at an International Monetary Fund forum in Bangkok, Warsh outlined his expectations for the technology’s economic effects and reiterated the central bank’s commitment to controlling inflation.

He also declined to indicate how the Federal Reserve might adjust interest rates at its remaining meetings this year.

AI Spending Initially Contributes to Demand

Warsh said the economic effects of artificial intelligence are likely to develop in stages.

In the near term, investment in AI is contributing to demand as companies expand spending on technology and related infrastructure.

Over the medium term, Warsh expects the technology to increase the economy’s productive capacity, potentially allowing businesses to generate more output.

He characterised AI as one of the most significant technological changes affecting the US and global economies during his lifetime.

However, he cautioned that the transition would not necessarily be straightforward.

The timing of productivity improvements, the implications for employment and the companies that ultimately benefit remain uncertain.

Labour Markets and Inflation Present Policy Challenges

Warsh identified several areas requiring further assessment as AI adoption expands.

These include changes in employment, the competitive structure of industries and the possible implications for financial stability.

The Federal Reserve is also examining whether productivity improvements could affect inflation dynamics over time.

To support this work, the central bank is using external task forces to study the economic consequences of artificial intelligence.

One group focused on productivity and jobs is scheduled to conduct its first field hearing in the San Francisco Bay Area on November 16.

The initiative forms part of the Federal Reserve’s efforts to evaluate the potential effects of technological change on economic conditions.

Warsh Declines to Signal Next Interest Rate Decision

On monetary policy, Warsh reaffirmed the Federal Reserve’s commitment to restoring price stability.

The central bank removed some monetary policy accommodation at its September meeting, but Warsh did not indicate whether further adjustments would follow.

Instead, he said decisions at the remaining meetings this year would depend on developments in economic activity, employment and inflation.

Warsh also discussed persistent inflation as an issue facing central banks internationally.

He said policymakers had demonstrated a commitment to price stability despite differences in economic performance across countries.

Broader Investment Expansion Contributes to Growth

Warsh said the US economy is benefiting from an increase in investment that extends beyond artificial intelligence.

He identified this broader capital spending trend as a factor supporting economic growth.

The Federal Reserve chair also said global economic performance had been more resilient than he expected several months earlier.

His assessment reflected economic conditions despite ongoing geopolitical tensions and conflicts.

Federal Reserve Reviews Economic Assumptions

Warsh said technological developments and structural economic changes require monetary policymakers to review established assumptions.

He emphasised the need to consider new evidence when assessing how AI could affect productivity, employment, inflation and financial stability.

The Federal Reserve’s research initiatives are intended to contribute to that assessment as the technology develops.

Warsh’s comments indicate that he expects AI to provide longer-term economic benefits, while recognising uncertainty about the transition and its implications for monetary policy.

The central bank’s immediate policy focus remains on incoming economic data and its objective of restoring price stability.

Bank of America has raised questions about the financial sustainability of the current artificial intelligence investment cycle, pointing to a substantial increase in capital expenditure forecasts and declining prices for AI services.

In a Friday research note, investment strategist Sebastian Raedler compared the expansion of AI infrastructure with previous periods of concentrated investment in emerging technologies.

The bank’s analysis focused on the relationship between capital spending, industry competition, service pricing and the ability of AI providers to generate revenue from increasing usage.

Hyperscaler Investment Expectations Have Tripled

Bank of America said consensus forecasts for hyperscaler capital expenditure over the next 12 months have risen from $330 billion in early 2025 to $1 trillion.

The projected spending represents approximately 3% of US GDP, compared with 2.2% during the railroad investment expansion of the 1870s and 1.1% during the technology investment cycle of the 1990s.

Raedler noted that earlier capital cycles often resulted in lower financial returns than investors initially anticipated, despite the continued adoption and development of the underlying technologies.

According to the bank, elevated profit margins during the initial stages of investment cycles can attract additional participants and encourage capacity expansion.

As supply increases and competition develops, companies may experience reduced pricing power and pressure on profitability.

AI Model Competition Differs From Earlier Cloud Computing Expansion

Bank of America contrasted the current AI market with the development of cloud computing during the 2010s.

The bank said the cloud industry benefited from substantial barriers to entry, which restricted the number of competitors and helped companies maintain pricing power.

AI model development has followed a different competitive pattern, with additional providers entering the market, including Chinese companies offering open-weight models.

Raedler reported that average token prices have fallen by around 50% since the summer.

The decline has occurred despite continued increases in the amount of AI processing activity, creating a distinction between rising service consumption and the revenue generated from that activity.

Lower Token Prices Have Yet to Produce Comparable Spending Growth

One argument supporting continued AI investment is that declining service costs could encourage wider adoption and greater overall consumption.

This interpretation draws on Jevons Paradox, which suggests that improvements in efficiency can increase total demand for a resource or service.

Bank of America acknowledged this argument but pointed to spending data that present a more mixed picture.

Figures from Ramp AI indicate that US business expenditure on artificial intelligence has edged lower since August, even as token volumes have continued to increase substantially.

The bank identified this difference as a potential challenge for companies seeking to convert rising AI usage into corresponding revenue growth.

Raedler said the combination of increased competition and pressure on monetisation resembles developments observed during earlier capital investment cycles.

Technology-Related Equity Indices Decline

The research note also highlighted recent movements in markets exposed to semiconductor and technology investment.

South Korea’s KOSPI has declined 20% since early October, while the Philadelphia Semiconductor Index is trading 13% below its recent peak, according to Bank of America.

The bank cited these declines alongside its assessment of the AI investment cycle and the potential financial effects of increasing industry capacity.

BofA Forecasts 10% Decline in Stoxx 600

Bank of America maintained its negative assessment of European equity markets, forecasting that the Stoxx 600 will fall 10% to 580 by the second quarter.

The bank also retained its preference for defensive sectors over cyclical industries.

Its positioning remains overweight consumer staples and pharmaceuticals, while banks, capital goods and semiconductor companies remain underweight.

The bank’s analysis suggests that the financial outcome of the AI investment cycle will depend partly on whether growing demand can offset declining service prices and the effects of additional competition.

For now, Bank of America continues to identify the scale of planned capital expenditure and the divergence between AI usage and spending growth as factors in its market outlook.

The World Bank has outlined plans to expand its critical minerals financing activities to $19 billion over the fiscal 2026–2030 period, compared with $3.6 billion during the preceding five years.

President Ajay Banga announced the target at the International Monetary Fund and World Bank annual meetings in Bangkok, where he also confirmed that the institution had identified 20 countries for potential cooperation on mineral development projects.

The proposed expansion is part of the World Bank’s Metals and Minerals implementation plan, which includes efforts to increase investment in mineral-related industries and infrastructure.

New Financing Target Covers Five-Year Period

The World Bank’s $19 billion target represents an increase of more than fivefold from the $3.6 billion provided for critical minerals activities between fiscal 2021 and 2025.

The plan covers the fiscal years 2026 through 2030 and is intended to expand the bank’s involvement in financing projects associated with mineral production and processing.

Banga said the institution had launched its first country compacts in cooperation with other multilateral development banks.

These agreements are designed to encourage the development of domestic industries in mineral-producing countries, with an emphasis on retaining employment and a greater proportion of economic value within national economies.

The World Bank has selected 20 countries for potential partnerships, although details of individual projects, participating governments and financing commitments were not disclosed.

US Supports Greater World Bank Role in Critical Minerals

The announcement follows calls from the United States for the World Bank to increase its financing activities in the critical minerals sector.

US Treasury Secretary Scott Bessent said earlier in the week that the institution should play a larger role in supporting mining operations, processing facilities and related infrastructure.

He identified project risk reduction and financing as mechanisms through which the World Bank could support additional investment.

Bessent also included deep-sea mining among the activities he wanted the institution to consider.

The World Bank’s implementation plan, however, adopts a precautionary position on deep-sea mining, requiring any related engagement or investment to comply with its existing policies.

Private Capital Mobilisation Reaches $112 Billion

Banga also presented figures covering the World Bank’s overall financing operations during fiscal 2026, which ended on June 30.

The institution mobilised $112 billion in private-sector capital during the period, representing more than three times the amount mobilised in fiscal 2022.

The earlier period preceded Banga’s appointment as president of the development lender.

When financing from the World Bank’s own balance sheet is included, total financing for fiscal 2026 amounted to $230 billion.

These figures cover the institution’s overall financing operations and are separate from the five-year critical minerals target.

The World Bank’s Metals and Minerals implementation plan establishes a financing objective through fiscal 2030, while the 20 identified countries represent potential partners for future mineral development initiatives.

HSBC expects third-quarter corporate results to provide a potential catalyst for global equities, with improving earnings guidance and continued demand for artificial intelligence computing infrastructure supporting its market outlook.

In a Tuesday research note, Alastair Pinder, the bank’s head of emerging market and global equity strategy, said recent bond market volatility had not materially altered HSBC’s positive assessment of equities.

The bank nevertheless acknowledged that higher interest rates and elevated volatility among individual stocks remain relevant risks for investors.

S&P 500 Earnings Multiples Have Fallen 16.5%

HSBC reported that the S&P 500’s forward price-to-earnings ratio has declined 16.5% since late 2025, despite the index approaching record highs.

The reduction in valuation multiples has affected a substantial proportion of the index, with 27% of constituents experiencing declines exceeding 20% this year.

The bank estimates that an additional 50-basis-point rise in the US 10-year Treasury yield would result in a further 4.3% reduction in the S&P 500’s forward earnings multiple.

HSBC also highlighted elevated volatility at the individual stock level.

Average three-month implied volatility for S&P 500 companies is currently at the 85th percentile of its historical distribution, while the VIX stands at the 35th percentile.

The difference suggests that broader index volatility measures do not fully reflect the price fluctuations anticipated for individual companies.

Earnings Announcements Have Coincided With Market Gains

HSBC identified corporate reporting periods as an important contributor to recent equity market performance.

Since 2025, the S&P 500 has gained an average of 4% during earnings reporting windows, compared with approximately unchanged returns outside those periods.

The bank expects another reporting season characterised by companies exceeding analysts’ forecasts and raising earnings guidance.

HSBC noted that the pace of improvement in corporate guidance is the fastest recorded since 2021.

It also expects $64 billion in customs refunds to provide support for corporate margins.

These developments form part of the bank’s expectation that earnings growth will continue to influence equity market performance.

Long-Term Fixed-Rate Borrowing Limits Interest Cost Exposure

Although HSBC expects higher bond yields to affect equity valuations, it anticipates a smaller direct impact on corporate earnings.

The bank estimates that approximately 80% of outstanding S&P 500 corporate debt is long-term and carries fixed interest rates.

As a result, changes in current market borrowing costs do not immediately affect interest payments on much of the existing debt.

HSBC therefore expects the effect of rising rates on corporate profitability to remain limited relative to their potential influence on valuation multiples.

AI Inference Demand and GPU Pricing Support Technology Outlook

HSBC continues to identify artificial intelligence as a source of potential earnings growth.

The bank pointed to increasing demand for AI inference workloads and stable GPU rental pricing as evidence of ongoing demand for computing resources.

Pinder also cited further signs that AI-related services are generating revenue, supporting HSBC’s expectations for companies involved in providing computing infrastructure.

The bank favours hyperscale cloud providers as the clearest near-term beneficiaries of additional computing demand.

Its assessment reflects expectations that growing AI usage will continue to require substantial processing capacity.

HSBC Retains Constructive Global Equity Position

HSBC’s market outlook reflects expectations that earnings growth and AI-related demand could offset some of the pressure on equity valuations from higher Treasury yields.

The bank noted that forward earnings multiples have already declined and that volatility remains elevated across individual S&P 500 stocks.

Nevertheless, improving corporate guidance, expected customs refunds and demand for AI computing infrastructure underpin its positive assessment of global equities.

HSBC expects third-quarter results to provide further information on corporate profitability and the extent to which AI investment is translating into revenue growth.