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Asia markets reach record highs on AI euphoria and Iran peace hopes
In the morning of Wednesday, the Asian session, stocks soared, oil prices fell and the dollar dropped after U.S. president Donald Trump hailed "great progress" toward a "final deal" with Tehran, while momentum for AI-driven trading accelerated. Trump said he would temporarily pause an operation of escorting ships through the Strait of Hormuz. The Strait of Hormuz carries a fifth of all global oil, and Iran has blocked it since late February. This has triggered a global energy shortage. Brent crude fell 1.2% to $108.51 per barrel on the news, while S&P500 e-minis futures rose 0.3%. MSCI's broadest Asia-Pacific index outside Japan rose 2.3%, setting a new record. The surge was led by the 5.1% increase in South Korea's Kospi which cleared the 7,000-mark for 'the first time'. Analysts from Westpac stated that "markets have embraced a calm and stable environment overnight. The risk of an escalation of the Middle East conflict has been reduced after U.S. Defense Secretary Pete Hegseth made sure the ceasefire remained in place despite U.S. trading blows with Iran yesterday." This boosted risk sentiment and supported a recovery in stocks across the U.S., Europe, at the same as crude oil prices "partially unraveled yesterday's rise." The S&P 500 and Nasdaq Composite both hit new records on Wall Street on Tuesday. Chris Weston is the head of research for Pepperstone Group Ltd. in Melbourne. "Investors continue to add to their positions in 2026 winners," he said. There has been some purchasing in S&P500 materials stocks. However, it is tech stocks that continue to attract the majority of flows. This includes Apple and memory plays. Samsung Electronics, which reopened the Seoul stock market after a long holiday, jumped by 12%. It now has a market capitalization of $1 trillion, surpassing Berkshire Hathaway, and is closing in on Walmart. Rushil Khanna is the head of equity investments in Asia for Ostrum, an affiliate of Natixis Investment Managers. He said that "this capex will lead to the creation of material value in Asia, as we are the providers of the 'picks and shovels' for the AI ecosystem." The shares of Advanced Micro Devices rose 16.5% during extended trading on Tuesday as the company announced second-quarter revenues above Wall Street expectations. This was aided by strong demand for its dead-centre chip as cloud computing companies increase spending on AI infrastructure. The?U.S. dollar index, which measures the greenback's strength against a basket of six currencies, snapped a three-day winning streak. It slipped 0.1% to 98.236. The dollar index, which measures greenback strength against six currencies, ended a three-day streak of gains, slipping 0.1% to 97.236. The dollar was $1.1724, and the pound sterling $1.3577. Both were up 0.3% on this day. The Australian dollar was trading at $0.7227. It rose about 0.6% to the highest level since June 2022. This was due to improved risk appetite, and a third consecutive interest rate hike that took place a day before. The yield of the 10-year Treasury Bond in the United States was unchanged at 4,424%. Gold rose 1.2% to $4,609.59. Bitcoin was down by 0.9% to $80,881.12 while ether fell 1% to $2,358.09. (Reporting and editing by Shri Navaratnam.)
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Oil prices drop by over $2 after Trump suspends Strait opening to possible deal
?U.S. Oil futures dropped on Wednesday morning by over $2 after U.S. President?Donald Trump announced that an operation to reopen Strait of Hormuz would be paused temporarily to determine if an agreement could?be finalised. As of 2326 GMT, U.S West Texas Intermediate fell $2.23 or 2.18% to $100.04 a barrel. Trump stated on Tuesday that while the operation to reopen?the Strait?of Hormuz would be paused,?the?blockade would?remain? in force. WTI fell 3.9% on Tuesday, after the ceasefire was maintained despite reports of exchanges. Brent dropped 4% and closed at $109.87. Market sources cited American Petroleum Institute figures on Tuesday, which showed that U.S. crude inventories had?fallen for the third consecutive week. Gasoline and distillate stock also 'declined. Sources who spoke on condition of anonymity said that crude stocks dropped by 8.1 million barges in the week ending May 1. The sources reported that gasoline inventories dropped by 6.1 million barrels and distillate stocks by 4.6 million barrels in comparison to a previous week. Helen Clark (Reporting; Chris Reese, Editing)
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South Korean consumer inflation in April is highest for nearly two years due to Iran war
As expected, the increase in South Korea's consumer price in April was the fastest in almost two years. The surge in oil prices caused by the Middle East conflict fueled the rise. Data from the government showed that the consumer price index increased 2.6% in April compared to a year ago, after increasing 2.2% in March. This was in line with the median poll forecast and marked the largest year-on year increase since July 2024. According to the Ministry of Data and Statistics, the index increased 0.5% from last month after increasing?0.3% the month prior. Prices of petroleum products rose 7.9% and international airfares jumped 13.5%. The South Korean government has set nationwide fuel price limits, which are reducing inflation pressure. Chun Kyu -yeon is an economist at Hana Securities. Chun stated that "however, for the moment, the trend of rising prices will continue to be valid, since there is a growing possibility of service inflation due to factors such as airfare increases." Even after the Bank of Korea's policy measures, the deputy governor said that it was time to consider raising interest rates. In March, the nation-wide fuel price cap was introduced for the first time since nearly 30 years. The next meeting of the Bank of Korea, which kept interest rates unchanged last month amid increased uncertainty about the Iran War, will be held on May 28.
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Suncor's profits surpass expectations as increased production offsets the oil market turmoil
Suncor Energy, Canada's largest energy company, beat Wall Street estimates for the first quarter adjusted profit on Tuesday. This was largely due to higher production and throughput volumes. Geopolitical unrest and volatility of global oil prices dominated the?quarter. Prices have risen by more than 87% in this year alone after the U.S./Israeli war against Iran damaged supply chains?and key energy infrastructure. Canadian oil and gas producers have steadily increased output while reducing costs. Suncor, and its peers have outperformed global competitors amid macro-uncertainty due to years' worth of investment. Suncor's quarterly upstream?production increased to?875,000 barrels a day (bpd), from 853,000 bpd one year earlier. The refinery's throughput increased by 15,000 bpd, to 498,000 bpd in the third quarter. Its utilization rate was 97%. Canadian producers benefited from capacity increases and higher nameplate capacities in the refining networks. The company has lowered its refinery usage guidance from?99%-102% to 90%-93%, but kept the throughput guidance at 460,000-475,000. Suncor also increased its projected share repurchases of over 30%, and anticipates buying back $4 billion worth of shares by 2026. According to data compiled LSEG, the Calgary-based company reported an adjusted profit per share of C$1.93 (US$1.42) for the 'quarter ended March 31. This compares with analysts' average estimates of C$1.79, according to LSEG.
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Distributors push back against the Petrobras-Vale agreement that has seen direct diesel sales increase in Brazil.
After Petrobras, the state-run oil company, signed a contract with Vale, fuel distributors reacted by reducing their sales. Distributors group 'Sindicom' sent letters to oil regulator ANP and were seen by them. They said direct fuel sales from producers create competitive distortions. The group includes distributors like Vibra, Raizen, and Ultrapar. Sindicom claimed that, unlike distributors of the RenovaBio program, such producers are not required by law to purchase CBios (carbonization credits), also known as CBios. Currently, only distributors are required to purchase them. ANP, in a document seen by us, reported that the direct sales of Diesel B (blended biodiesel) to large consumers were 22.39 millions liters, up from 1.1million liters the previous quarter. ANP confirmed the figures when asked for comment but stated that it would not reveal which manufacturers made the sales "for reasons of competition". Petrobras is Brazil's main diesel producer. Petrobras announced in January that it had reached an agreement with?Vale for the supply of diesel to?the miner?s operations located in Minas Gerais. ANP reports that Minas Gerais purchased 19.49 million liters (nearly 90%) of the diesel directly from producers reported between January and march. In one of the letters Sindicom sent to ANP, it said that "as producers aren't obligated agents in RenovaBio the direct sale by these agents of fossil fuels to large consumers takes place in asymmetrical manner in comparison with distributors." Petrobras stated that it constantly evaluates the possibility of direct sales to large customers, always in compliance with current legislation. It did not confirm the volume sold. Vale stated that the agreement between Petrobras and Vale is subject to confidentiality clauses. The miner did not reveal the purchased quantities. According to statements made by previous executives, Petrobras was seeking to sell fuels directly to large consumers. This strategy would allow Petrobras to gain a greater?share of market and be closer?to the end customer in a more profitable manner. The state-owned firm's executives have claimed that they lost contact with the end consumer after the sale of BR Distribuidora – now Vibra – in 2019. (Reporting and writing by Marta Nogueira, Fernando Cardoso, David Gregorio).
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Ameren's quarterly profits rise as infrastructure investments boost returns
Ameren, the utility company, reported a?23% increase in its first-quarter profits on Tuesday. This was primarily due to earnings from infrastructure investments that aimed to improve reliability. Utility companies are increasing spending on transmission and delivery networks to meet the rising demand for power in 'the U.S. Electric segment revenue rose by?2.4% in the quarter to $1.66?million, while revenue from the gas segment grew by?8.4% to $515?million. Ameren reported that its net income for the quarter ended March 31 rose to $357 million or $1.28 a share. This is up from $289 millions or $1.07 a share compared to a year earlier. St. The?St. The?Missouri division's quarterly results were negatively affected by lower retail electricity sales and higher interest costs, due to increased borrowing for infrastructure projects. Ameren 'Missouri reported a?electric?sales figure of 9,031 kilowatt-hours, down from 9,421 kilowatt-hours last year. This is due to the warmer than normal winter. Ameren Missouri and Ameren Illinois, its rate-regulated utility subsidiary companies, serve?about 2.5?million electricity customers and?more than 900?000 natural gas customers over a 64,000-square mile area. (Reporting and editing by Arunima Kumna and Sumit Saha, Bengaluru)
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US gasoline prices reach $4.50 per gallon as the summer driving season approaches
GasBuddy data showed that the U.S. average retail price of gas in the United States surpassed $4.50 a galon on Tuesday, for the first time since July 20, 2022. The U.S.-Israeli conflict?with _Iran? was disrupting a significant portion of the global oil supply shipped through the Strait of Hormuz. The U.S. Memorial Day Weekend and the peak driving season of summer are approaching. As President Donald Trump and Republicans campaign for November's midterm elections, rising pump prices present a serious political risk. Analysts say that without a de-escalation of the Middle East, U.S. motor oil prices could surpass previous records. As of 5:20 pm, the national average gasoline price was $4.52 per gallon. GasBuddy's data shows that the price of gasoline in the U.S. was $4.52 per gallon on Tuesday. Prices reached $4 late in March, the highest level since August 2022 when Russia invaded Ukraine. GasBuddy's data shows that California has the highest average price at the pump in the United States, $6.14 per gallon. On fears that the Gulf War will continue, gasoline prices have risen along with crude oil futures. Brent crude, the global benchmark for crude oil prices has risen 58% since war began. GasBuddy analyst Patrick De Haan stated that the Strait of Hormuz closure continues to push up oil and gasoline prices. However, we've seen refinery issues which have exacerbated some of these increases. Last week, BP's 440,000-barrel-per-day oil refinery in Whiting, Indiana, experienced a brief power outage that caused one of its processing units to be shut down. The company has since reported that operations have been restored. De Haan stated that "if the Strait of Hormuz doesn't open, I expect gas prices to stay over $4.50 per gallon this summer." Before U.S. and Israel launched their attack on Iran, February 28, approximately?20% global oil supplies were passing through the Strait of Hormuz every day. Morgan Stanley stated that U.S. gas inventories are?drawing quicker than the normal seasonal pattern. The base case indicated that stocks would fall below 200 million barrels in late August, close to historic summer lows. EIA data shows that U.S. gasoline inventories fell by over 6 million barrels in the last week, and were at 222.3 millions barrels on April 24. This was the lowest level since December, and more than 2,000,000 barrels below seasonal averages for the past five years. The data show that gasoline demand reached 8.95 million barrels based on a four week average, an increase of 1% compared to the same period last year. Morgan Stanley said that the?demand remained stable despite pump prices of $4 or more. It is not driving draws, but it's not soft enough for the supply-driven stocks to slow down. U.S. gasoline contracts were hovering around $3.64 per gallon on Monday, their highest price since 2022.
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Iranian media reports three dead in fire at a shopping centre west from Tehran
Iranian media reported that at least?three people were killed and 26 injured after a fire broke out in a shopping center west of Tehran. IRIB, Iran's national broadcaster, cited the?fire departments as saying that the?fire had been "largely contained". Fars, a semi-official news agency, reported that the cause of the incident is still unknown. Iranian media, including Fars showed a video of a plume of heavy smoke rising out of the site. The location of buildings, utility poles and trees, and the road layout matched the satellite and archive imagery. Fire broke out after a renewed 'fire exchange' between Iran and the United States on Monday.
ROI-Is Wall Street on a boom loop or heading towards a doom loop? McGeever
Wall Street is experiencing a virtuous circle. The expectations of corporate earnings growth and investor returns have pushed benchmark indices to the sky, causing investor optimism to soar.
This is the "boom?loop " that Bank of America analysts coined. Or, are we sown the seeds of a reversal which could lead to turbulence?
How investors interpret signals is important.
Below are a series of charts & graphics that highlight a few key trends behind today's eye popping headline index numbers. These stretched metrics could indicate that the market has become dangerously overvalued or that we are in the beginning stages of a hyper-bullish market fueled by artificial intelligence.
This is the trillion-dollar problem.
DIVIDEND YIELDS ULTRA-LOW
S&P 500 Dividend Yield - total dividends divided against the value of index - currently stands at just 1.1%. This is only 50 basis points away from the lowest level seen in the last half-century and since 2000.
A higher S&P dividend yield indicates that the index is cheap and vice versa. A lower yield could also reflect that dividends are a smaller part of total returns for investors than they were in the past.
It is clear that U.S. stocks are pricing in optimism. Remember that the last time dividends yields were so low was in 2000 when the dotcom boom burst.
SKY-HIGH EARNINGS ESTIMATES
It is amazing how much the U.S. earning outlook has improved in recent weeks. According to LSEG, the first-quarter growth in earnings per share is projected at 28%. This is almost twice what was expected on April 1 by consensus.
The big tech industry is largely responsible for this. Communication services earnings will rise by over 55% in the first quarter of this year compared to the fourth quarter last year. Information technology earnings are expected to increase by nearly 52% to $189 billion.
Analysts expect a 46% increase in EPS this year. On April 1, the consensus was 18% and on January 1, it was below 8%.
NEGATIVE EQUITY RISK PREMIUM
The "equity premium", or the difference between equity and bond yields, has dropped below zero. It is now at its lowest level since July of last year and is fast approaching 2024's low of minus 0.7%. The ERP has been negative since 1999.
A negative ERP is a sign of either high stock prices or low bond prices. Or both. Prices may not be stretched if they're supported by sound fundamental reasons.
What is the latest verdict? It depends if you believe the AI tech boom is going to continue to drive earnings.
AI CAPEX SET RECORDS
The U.S. has experienced one of the largest corporate investment booms ever, as megacap hyperscalers are building the infrastructure which will?underpin the AI revolution. The current buildout is larger than the Manhattan Project or Space Race and is similar to the railroad boom of the 19th century.
Analysts at Morgan Stanley and Goldman Sachs have just increased their forecasts of how high this spending will rise.
Morgan Stanley now expects that the five largest U.S. hyperscalers will spend $800 billion on AI this year, and $1.1 trillion in 2019. This is up from their previous predictions of $765 billion and $850 billion. Goldman's analyst expects cumulative AI infrastructure expenditure to reach $7.6 trillion in 2031.
Both bullish and negative market views are supported by these staggering?figures.
The bull wonders how an investment of this magnitude can produce anything other than Wall Street's record-breaking run?
The bear wonders how the project will be funded and, most importantly, if?these gargantuan expenditures can generate a return on investment that is sufficient.
Answers to these questions will determine the future of Wall Street and?U.S. The answers to these questions will determine how Wall Street and the?U.S.
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(source: Reuters)