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The buffer of savings for US consumers is gone. What now? McGeever
Savings levels are plummeting as corporate America continues its?AI boom. This growing chasm could have serious political implications for President Donald Trump. Egal how you define the issue of inequality - two-speed, K-shaped, or haves and has-nots, it's becoming more apparent. Last week, two data points brought this to a'sharp focus: personal savings and profits of corporations. In April, the personal savings rate dropped to 2.6%, a four-year low. The rate has been cut in half over the last year, and is now at its lowest level since 2008. Zoom in and you can see how thin the cushion of savings is for American consumers. The savings rate of consumers has never been so low since 1950s records started. Inflation, fueled by energy prices that are still high, is now surpassing wage growth for first time in 3 years. Americans' rapid depletion of savings in order to maintain their spending cannot last. The consumer confidence index, which is closely monitored by the government, has also fallen to its lowest level ever. It's reasonable to expect that the most important and largest pillar of the economic system, household consumption, could be under pressure soon. Wall Street doesn't have many questions at the moment, as U.S. stocks continue to reach record highs. It's not surprising, given the state of corporate America. Last week, figures released showed that U.S. profits for corporations as a percentage of output in the first quarter increased to 18.4%. This is the second highest reading since records started in the 1940s. The pre-tax profit as a percentage of GDP remained near the record high 14%. Even as many Americans' financial situation becomes more precarious, corporate profits have never been higher. Phil Suttle, an economist, says that these trends "are not sustainable from a political or economic perspective". How they are resolved is an unresolved issue, but in my opinion, both consumption and profits have significant downside risks. Masking the Pain It makes perfect sense. Who is spending the most? The estimates of Moody's analyst that the top decile income accounts for 50% all consumer spending have been disputed. A more accurate estimate could be between 35-40%. It's still a substantial amount. The top 10% of Americans own 90% of U.S. stock, and the top 1% represent half of all the wealth in the U.S. stock market. U.S. equity prices have risen 30% for these asset owners in the last 12 months. The asset-owning wealthy can continue to support aggregate expenditure as long as the stock prices remain high. This will keep headline GDP near a healthy 2 percent rate. This masks the growing?strain on the lower half of the U.S. populace, which is squeezed by rising borrowing costs, inflation and shrinking savings. Look at the increasing struggles of consumers to pay off their debts. Troy Ludtka, SMBC Nikko Securities Americas, notes that auto loan delinquencies 90 days and more reached a record high of?5.6% during the first quarter, while credit card delinquencies increased to 13.1% - the highest level since 2011. The interesting question is when does the lowest point of the K stop the economy as a whole? What is the limit of this inequality? Ludtka makes a point. Unsustainable Path Limits may not be as much a matter of economics but rather a matter of politics. Trump's ratings for his economy have plummeted since he launched military strikes against Iran three months back, mostly due to the rising cost of living. Polls indicate that the Republicans are likely to lose control of the House of Representatives and possibly the Senate in the midterms, with the "cost of living" being a major concern for many voters. The AI-fueled capex boom and the rapid growth of corporate profits may increase these political pressures even if the economic situation continues to be relatively stable. The ultimate question is, how long can the average American'stay afloat' and continue to spend now that their saving buffers are rapidly disappearing? How extreme will the U.S. public allow this "K"-shaped dynamic to become before they push back with policy demands Trump's Republican Party could find out this in November. You like this column? Check out Open Interest, your new essential source for global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
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Zelenskiy claims that the Ukrainian military can strike Russian logistical systems throughout occupied territories
Volodymyr Zelenskiy, the President of Ukraine, said on Monday that Ukraine was now capable of 'hitting Russian logistical?throughout occupied areas of Ukraine' and had caused shortages of fuel throughout Crimea and Russian-held regions. In his video nightly address, Zelenskiy said: "Our troops can now reach Russian military logistic across the?entire depth of the temporarily-occupied territories." "In reality, there are virtually?no roads safe for the occupiers in the south and the east of our country." In recent months, Ukraine has intensified its?strikes against targets at medium range and others hundreds of kilometers away from Ukraine's border. It is focusing on Russia’s oil industry. Zelenskiy stated that between January and May, Ukrainian forces struck 15 Russian oil refineries. He said that Ukraine's actions provided "further evidence that there will not be peaceful times for the occupier?on our land." This is also reflected by shortages. Above all, fuel shortages are a problem in Crimea and other areas which remain under occupation. After Ukrainian drone attacks slowed down road supplies in the south-eastern part of Ukraine, drivers in Crimea, a Ukrainian peninsula that was annexed to Russia in 2014, faced a rationing of gasoline on Monday. (Reporting and editing by Chris Reese; Oleksandr Kozoukhar and Ron Popeski)
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Gold drops as inflation fears rise over Middle East conflict
Gold prices dropped on Monday, as tensions in the Middle East increased inflation fears and reinforced expectations that central banks may continue to tighten monetary policy. Gold spot was down 1% to $4,489.34 an ounce at 1:50 pm EDT (1750 GMT), following a two-week peak on Friday. U.S. Gold Futures closed 1.9% lower, at $4,506,30. Holders of other currencies will now pay more for metals that are priced in U.S. dollars. Jim Wyckoff, an analyst at American Gold Exchange, said that if bond yields continue to rise and rates start to stabilize or trend downward, gold will remain under pressure. Iran claimed it attacked a U.S. base after U.S. strikes on Iranian military targets over the weekend. U.S. president Donald Trump said, however, that talks with Iran were "continuing at a rapid rate." Oil prices rose, increasing inflation concerns linked to the Iran Conflict, which could cause central banks to increase interest rates in order to reduce rising price pressures. According to CME Group’s FedWatch tool, traders have estimated that there is a 54% probability of at least one rate hike in the U.S. by year's end. Gold is often considered a hedge against inflation, but its appeal tends to diminish in an environment of high interest rates because it doesn't generate any yield. The market will be watching a series of U.S. job data releases that are due to be released this week as well as?remarks by Federal Reserve officials. Ole Hansen, analyst at Saxo Bank, said: "Once geopolitical stability is achieved and energy shocks begin to subside, we expect investors will refocus their attention on the structural themes that have supported the bull market for gold in recent years." He said that central banks will continue to be net buyers in the next year. Spot silver remained flat at $75.26 per ounce. Platinum gained 0.7%, reaching $1,929.60, and palladium increased by 0.9%, to $1366.44. Morgan Stanley stated in a Friday note that palladium was moving towards equilibrium as the supply constraints were offset by a weakening of auto demand. (Reporting and editing by Shailesh Kuber and Barbara Lewis; Ashitha Shivaprasad, Bengaluru)
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US crude exports reach record highs in May, as the war with Iran tightens up global oil supplies
Ship tracking estimates revealed on Monday that U.S. crude oil exports reached a record of?5.6m barrels per day during May, as the Middle East Crisis boosted demand from Asian and European refiners for U.S. oil. U.S. and Israel's war against Iran caused the biggest ever disruption in the global energy market, with refiners scrambling to find alternatives to Middle Eastern supplies. The Strait of Hormuz is the conduit for a fifth of all oil and gas in the world. A key waterway was effectively shut down when the war began at the end February. According to Kpler data and analytics, U.S. West Texas Intermediate crude prices were trading at a significant discount to Brent, a global benchmark. Physical U.S. crude is typically priced at a difference to WTI. A large discount to Brent allows foreign buyers to buy U.S. oil more affordably and ship it around the world. WTI traded in March at a 20.69-percent discount to Brent futures, the largest in 13 years. Middle East supply disruptions led Brent to increase faster than WTI. When the bulk of deals to export crude in May were completed in April, the spread was an average discount of minus $8.86 compared to minus $4.85 on average before the war. Exports to Europe, and Asia, reached record levels in May. Asia took 2,45 million barrels per day (bpd) of the barrels exported, maintaining its position as the top buyer in the second consecutive month. Europe came in second with 2.4 million barrels per day. The demand from Japan - which typically imports its crude oil from the Middle East - accounted for a large share of Asian imports in May. At 808,000 barrels per day, this was a 32% increase on the previous month, and set a new record. Matt Smith, Director of Commodity Research at Kpler, said: "It is not surprising to see Asia pull so much due to the loss of barrels in the Mideast Gulf." In May, U.S. crude oil bound for the Mediterranean Sea and Black Sea reached a new record, with Bulgarian, Croatian, Turkish and Greek buyers emerging. The increase in European demand is also attributed to the record imports from Italy of 335,000. Rohit Rathod is a senior analyst for Vortexa. He said that the Asian purchases were primarily driven by necessity, while European purchases were primarily driven by favorable shipping?economics and lower rates of transatlantic freight. About 5% of U.S. oil exports were barrels from strategic petroleum reserves. Oil barrels from the U.S. strategic petroleum reserve, which is currently releasing 172 million barrels to fight the spike in crude oil prices, are headed for European and Asian buyers. EXPORTS SET TO WEAKEN Exports are expected to slow in June after a bumper month of May. This is because the hopes for a peace agreement have eased supply concerns, and WTI's price discount to Brent has narrowed. WTI's Brent discount was wide in early May but it has narrowed in the second half. It is currently trading at around -$6 on Monday. Consultancy Energy Aspects estimated exports at about 4.9 millions bpd in June and 4.60 million for July. Georgios Sakelariou, chartering expert at Signal Maritime said that they expected exports to drop by more than 1 million bpd compared to the month of May. The company also reported seeing at least 10 fewer Very Large Crude Carrier for dates in June compared with May. Analysts and sources said that low inventories of WTI in the United States would also encourage more barrels to be stored domestically. This will reduce exports. Prices for the top U.S. Export grades, WTI Midland Crude at East Houston and Mars Sour Crude, both fell into July trade due to a decline in demand. MEH traded Friday at a $1.15 premium to WTI, compared to a $7.75 premium in April for delivery in May. Mars traded on Friday at a $1.50 premium, compared to a high of $27.50 in April.
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Elliott buys A$1 billion stake of Northern Star in Australia, calls for strategic review
Elliott Investment Management disclosed a stake in Northern Star Resources worth over A$1 Billion ($714.60 Million) on Monday. The company called for the Sydney listed miner to appoint a new 'CEO' and conduct a strategic review, including a possible sale. The activist investor from the United States cited Northern Star’s underperformance against peers, “repeated operations missteps”, seven missed outlooks in four years and “deeply inadequate disclosures when compared to senior global peers”. The Australian Financial Review reported the first stake on Monday. It said that Elliott would be among the top five shareholders of the miner. Northern Star didn't immediately respond to our request for a comment. The miner’s shares have dropped over 31% in the past year. Evolution Mining and Perseus Mining, on the other hand, are down by?2% and 8?%, respectively. Gold producer Kalgoorlie Consolidated Gold Mines has suffered operational'setbacks'. However, it launched a A$500m buyback program in April. It said that the current share price "does not fully reflect the future potential and quality of our assets". Stuart Tonkin, the managing director of the company, announced his resignation last month after 13 years. Elliott, a company that manages assets worth $79.8 billion, stated in its presentation that Northern Star should also re-establish its board of directors with directors with gold mining operational expertise. Elliott stated that Northern Star's value of its assets is materially underestimated. The Kalgoorlie gold mine, for example, has the potential to become one of the largest gold mines in the world. And the Hemi greenfield project is among the most appealing greenfield 'gold projects' in the developed world. Elliott said that "Northern Star’s recent pattern of operational missteps?, cost overruns, and inconsistent strategic directions demands urgent action."
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Orla Mining suspends Mexico mine operations because of union blockade and stoppage
Orla Mining announced on Monday that it had temporarily halted operations in its Camino Roco?goldmine in Zacatecas after what the company called an 'illegal work stoppage and blockade'?by unionized employees. We were unable to reach the union immediately for comment. Orla, in a press release, said that the dispute was over negotiations regarding worker productivity bonuses and profits-sharing entitlements. She added that "the work stoppage" did not comply with Mexican law including a strike notification. Orla has said that it is in discussions with the?union leadership' to resume safe operations and to return employees to work quickly. The Canadian miner stated that all equipment necessary?to maintain?the safety of the operation and the environment continues to be monitored and operated. On Tuesday, June 2, the Department of Federal Labour Conciliation will meet with representatives of the company and unions. Orla said that "given the current duration of the production interruption, and the nature heap leach processing the Company will assess the potential impact of the work stoppage?on its full-year guidance for Camino?Rojo," The heap leaching method is a mining technique whereby a chemical solution?is dripped on piles of crushed ore in order to?dissolve the precious metals such as gold and extract them. The mine produced 96.764 ounces of gold?in 2025. In May, Equinox?said that it would purchase Orla?Mining as part of an all-stock transaction to create a North American producer of gold worth approximately $18.5 billion. (Reporting and editing by Nia William in Bengaluru, Anushree?Mukherjee from Bengaluru)
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EU may maintain Russian oil price caps at $44 per barrel as a way to exert pressure on Moscow
EU diplomats told reporters on Monday that the European Commission could propose to leave the G7 price limit?on Russian oil unchanged when it reviews the price cap in July. This would be a 'effort to reduce Moscow's windfall resulting from the Iran War and the subsequent?oil shock. This 'idea' was floated by the Commission in meetings with European Union representatives over the weekend. It could be included in their 21st package against Russia in response to its war in Ukraine. Last year, the Group of Seven nations, including allies and the U.S. agreed to a price cap that would move based on the market. This was done in order to make the system more effective. In order to reflect the lower average oil price, the countries reduced the price of a barrel from $60 to $47.60. They then revised it down to $44.10 in January. The price cap was set to be implemented in late 2022. Its goal was to reduce Russia’s revenue sources without causing an oil price spike. Third?countries are allowed to buy Russian oil at the maximum price by using Western shipping services and insurance. The cap still applies to up to 30% of the?seaborne Russian crude oil, while the remainder is transported by a shadow-fleet. The West wants to maintain pressure on Russia but Moscow has been enjoying some financial relief since the Strait of Hormuz was closed. Prior to the beginning of the conflict on February 28, one-fifth the world's oil and natural gas flowed through the Strait of Hormuz. Sources said that the Commission could also propose that future price reviews cannot exceed $60 per barrel, regardless of current average prices, given the outlook for sustained high prices throughout the rest of the year. Brent oil futures traded around $93 per barrel on Monday, and analysts have raised their average 2026 oil price predictions 40% since February to 'around $90 a barrel. This measure may be a compromise for the idea that was stalled of a complete ban on maritime services?on Russian Oil, which would have?ended the cap system. The EU countries adopted the legal basis of the ban as part of the previous sanctions package. However, they added the caveat that a decision on the phase-in will not be taken until further coordination with G7. Reporting by Julia Payne, Editing by Paul Simao
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Stocks near record highs, as AI optimism overshadows Iran tensions
Investors were less concerned about the escalating tensions between Iran and the United States, which have driven oil prices higher, as global stocks held onto record highs. U.S. officials said they had struck Iranian military bases?over the weekend, and Iran's Revolutionary Guards responded by claiming to have targeted a U.S. base. Iran's news agency Tasnim reported on Monday that Iran has halted indirect?negotiations after Israel ordered troops into Lebanon to fight Tehran-backed Hezbollah. Fresh hostilities could complicate diplomatic efforts to bring an end to the three-month war. Wall Street's benchmark S&P 500 index was largely flat, but near record highs. Energy and technology stocks led gains, while consumer discretionary and materials and utilities were the biggest losers. The Dow Jones Industrial Average dropped 0.43%. The S&P 500 declined 0.05%. And the Nasdaq Composite rose by 0.11%. The pan-European STOXX 600 fell by 1.1%. Nvidia announced a new chip that will bring AI to laptops and desktops. This raises the stakes for the competition between other technology and semiconductor companies. The MSCI All-World Index fell?0.20% on Monday after reaching a new record high. Mark Hackett is the chief market strategist for Nationwide in Philadelphia. He said: "We're in an unusual market period where fundamentals and technicals are convergent to drive the markets higher. We have strong earnings revisions, relentless buying, and a strong economy." Investors fear being on the wrong side of a major development if it occurs. Brent crude futures jumped nearly 7%, to $97.43 per barrel.
Asia stocks shiver as Middle East fears offset AI optimism
Asian stocks started trading cautiously on Tuesday, as there was uncertainty about whether the ceasefire agreement in the Middle East conflict would cap the optimism that had been generated by AI.
MSCI's broadest Asia-Pacific share index outside Japan fluctuated as trading began, with the last 0.5% lower. This was led by a 2.2% drop in Korean shares following an initial higher opening. S&P 500 futures fell 0.3% while the Nikkei225 in Japan dropped 0.7%.
Analysts from Westpac stated in a recent research note that "conflicting news" coming out of the Middle East had left the?markets?whirling. Iran announced that negotiations with the U.S. were suspended only to have President Trump follow up with reassurances in the last few?hours that the talks are still continuing "at a fast pace". Brent crude remained'steady' around $95 per barrel following Lebanon's announcement of a partial ceasefire on Monday between Hezbollah, Israel and Lebanon. This could pave the way for renewed efforts to bring an end to the three-month conflict between the United States.
The S&P 500 closed overnight 0.3% higher, after ISM's Manufacturing PMI rose from 52.7 to 54.0, in May, exceeding expectations that it would reach its highest level in 4 years. This was likely due to businesses placing orders in advance, in response to rising prices and shortages caused by the war against Iran.
David Rosenberg, president and founder of Rosenberg Research, Toronto, wrote in a client note that "the equity market is in boom-mode" despite rising energy prices and real interest rates. The S&P 500 has now been up for nine weeks in a row. This streak was last seen in late 2023. AI suppliers in Asia made gains after Anthropic, a?AI developer, said that it had filed confidentially for an IPO in the United States. This could result in a trillion dollar valuation. Alphabet's shares fell 0.7% following the announcement that it was looking to raise $80 Billion in equity offerings. This includes an investment from Berkshire Hathaway.
The U.S. Dollar Index, which measures the strength of the greenback against a basket of six currencies, has held steady at 99.18. It is still firmly in the range that it's been occupying for the last three weeks.
The yield on 10-year Treasury bonds in the United States is now 4.455%, a decrease of 2.0 basis points. Gold fell 0.1% to $4,479.17.
Bitcoin was down by 0.2% to $71,232.83 while Ether was unchanged at $2,002.03. (Reporting and editing by Gregor Stuart Hunter)
(source: Reuters)