Repricing

• The European Central Bank (ECB) warned in its bi-annual Financial Stability Review on Wednesday that financial markets face the risk of a sudden and sharp correction. • The ECB noted that asset prices remain "stretched by historical standards" and that investors are currently underestimating significant downside risks. • Key threats cited include geopolitical tensions, specifically the war in Iran, as well as fiscal and macro-financial instabilities.

• Oracle reported earnings that exceeded expectations, lifting its stock price, while Adobe continues to face investor skepticism over its AI strategy and competitive positioning amid broader tech sector repricing. • Morningstar downgraded Adobe's economic moat rating alongside Salesforce and ServiceNow, citing concerns that AI disruption could erode traditional software competitive advantages and justify lower valuation multiples. • The broader earnings season reveals a disconnect between traditional valuation metrics and AI disruption risks, prompting investors to reassess which software companies can sustain pricing power and market share in an AI-transformed landscape.