What happened in markets
The Australian sharemarket edged lower over the week, with the ASX 200 declining 0.1%, as weakness across resource and technology shares offset strength elsewhere. The Materials sector (-7.7%) was the largest detractor as gold and copper prices weakened. In addition, the Information Technology sector (-5.1%) also declined, mainly due to NextDC (-38.9%), which dominated the news throughout the week after power delays drove a sharp FY27 earnings downgrade. In contrast, the Financials sector (+4.0%) benefitted from strong gains across major banks, while Telecommunications (+4.0%), Industrials (+2.7%) and Utilities (+1.9%) all advanced. Overall, broad strength across defensive and financial sectors largely offset weakness in technology and resource shares.
The US sharemarkets finished lower over the week, with the S&P 500 falling 0.5% and Nasdaq declining 0.7%, as concerns around AI funding, capital expenditure and elevated valuations weighed on technology stocks. The Communication Services sector (-6.2%) led declines as investors questioned AI spending and monetisation, while Palantir Technologies (+5.8%) recovered following positive analyst target revisions. The Industrials sector (-1.9%) also weakened, while the Energy sector (+1.6%) benefitted from persistently high oil prices, which are back above $100 USD. The pullback remained concentrated in AI-related names rather than signalling broader risk aversion. Attention now turns to major technology earnings this week for further insight into AI spending and demand.
The European sharemarket pulled back over the week, with the STOXX Europe 600 declining 1.4%, reversing some of the previous week’s strong gains as French fiscal concerns, widespread protests and higher energy prices weighed on sentiment. The Basic Resources sector (-7.7%) led declines as weaker commodity prices and concerns around Chinese demand pressured miners, while the Banks sector (-4.9%) fell as French borrowing costs increased. Aerospace shares also weakened, including Safran (-14.3%), despite better-than-expected revenue, while Rolls-Royce declined 13.8% alongside broader industry weakness. In contrast, the Health Care sector (+7.0%) was the standout performer, supported by defensive demand and positive earnings. Volatility is expected to remain elevated amid persistent uncertainty surrounding global conflicts and resulting energy-price pressures, alongside political protests, the upcoming ECB fiscal decision and rising bond yields.
Stock & sector movements
What caught our eye
The Rocket in the Showroom
Of course, what caught our eye last week was Tesla’s flying car! In a dramatic live show on 16 October, the automaker revealed its new Roadster model, with the headline feature being that it can briefly leave the ground. We think the more important detail is who built the parts that make it fly.
The launch figures show a 0 to 60mph (97 km/h) time under 0.6 seconds for the performance spec, a top speed above 230mph (370 km/h), and a fan system with enough suction to hold the vehicle to a ceiling. The thrusters that provide the lift are cold gas units developed by SpaceX. Production is not due until 2028, and brokers agree it will do almost nothing for near-term earnings. Some are calling it a halo product (designed mainly for attention); we’d suggest it’s a prospectus.
The Roadster lands in the middle of a live conversation about whether Tesla and SpaceX should become one company. That conversation moved from speculation to process last week. On the 3Q 2026 earnings call, Elon Musk confirmed both companies have formed special committees of independent directors to examine a tie-up, with Musk himself excluded as a conflicted party. He added that a merger should not be assumed to be certain, though he thinks it is a good idea. The evidence that the two businesses already operate together is hard to miss.
SpaceX is funding the first Terafab chip plant at a cost of US$16.8 billion, Tesla carries a stake in SpaceX on its own balance sheet, and the Roadster’s thrusters came out of a rocket program. A car that flies is the most visible symbol of a relationship that already runs deep.
Our view is that the showroom theatre is distracting from a plainer story about cash, and last week’s result made that story more interesting rather than less. Tesla reported 3Q 2026 earnings per share of US$0.48 against expectations of US$0.44. Free cash flow was US$1.5 billion, when the market had braced for an outflow of US$4.9 billion. The swing came almost entirely from spending. Capital expenditure landed at US$4.7 billion against the US$8.0 billion expected, with full-year guidance cut. In other words, Tesla showed it can turn the cash tap down when it wants to, which is reassuring on funding and less reassuring on how quickly the robotaxi, robot and chip ambitions will actually be built.
Tesla is now valued at roughly US$1.53 trillion and trades at well over 150 times next year’s expected earnings. A multiple like that is a statement that near-term profits do not matter to the people setting the price.
A merger would answer the funding question by placing Tesla's spending inside a larger group with a rocket and satellite business behind it. It would not answer the valuation question, and it would raise a new one about what Tesla shareholders give up. There is genuine progress to credit, with the Cybercab fleet in Austin growing eightfold to more than 300 vehicles in a month. Even so, our read is that the current share price already reflects most of its ambitions.
For investors, the lesson is to separate the engineering from the economics. Still, watching a car hang upside down and fly through the air was pretty cool.
The week ahead
Locally, investor focus will turn to Wednesday’s September inflation data, including headline and trimmed mean CPI. Investors will be watching whether underlying inflation is continuing to moderate, particularly given recent oil price movements, with the result likely to shape expectations for the RBA’s interest-rate outlook.
Overseas, the US Federal Reserve and ECB announce interest-rate decisions on Thursday, alongside key European growth and unemployment data. US earnings season also accelerates, with Visa reporting Tuesday, Microsoft and Alphabet on Wednesday, and Amazon on Thursday, providing important updates on consumer spending, cloud computing, artificial intelligence investment and the broader economic outlook.