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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. You like this column? Open Interest (ROI) is your new essential source of 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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Chambers of Commerce predict that German exports will flatline in this year due to Middle East uncertainty
The Chambers of Commerce said that German exports will stagnate in this year. They lowered their previous forecasts for a slight increase as the companies in Europe's biggest economy are facing?supply-chain snarls, and uncertainty due to the Iran War. The German Chambers of Industry and Commerce had previously predicted a 1.0% rise in exports of both goods and services. Volker Treier is the head of DIHK's foreign trade. In a survey conducted by DIHK, 4500 German companies that operate abroad reported that high energy prices are a major business risk. This is more than twice the number of respondents in 2025. 40% also cited disruptions to supply chains, and 37% cited raw material costs. A MORE PESSIMISTIC PENSION The survey also revealed that 32% of respondents were pessimistic regarding the medium-term economic outlook. They believe the economy will worsen over the next year as the Iran War exposes the vulnerabilities in global supply chain. This is an 8-point increase from DIHK's last survey, which was officially called the AHK World Business Outlook and conducted before the U.S. vs. Israel war with Iran broke out at the end of February. "This is not just an economic slowdown. "Uncertainty has become the main factor," said?Treier. The authors of the survey said that the geographical impact on German companies with overseas operations is dependent on their dependence on oil and natural gas imports from Gulf Region. The majority of companies in Asia-Pacific, including China, and those 'closest to conflict zones', are sceptical regarding the months ahead. Companies operating in China and the United States, as well as South America's Mercosur region, remain relatively optimistic. (Reporting and editing by Barbara Lewis, Susan Fenton and Miranda Murray)
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Copper prices recover from 3-week lows on the back of bargain-hunting; COMEX is outperforming
Prices of copper rebounded on Wednesday after they hit a?three-week low, as investors benefited from lower prices. Meanwhile, U.S. prices rose on speculations about possible tariffs on the metal. Benchmark 'three-month copper at the London Metal Exchange increased 0.4% to $13,053 a metric ton, in open-outcry official trading after reaching its lowest level since March 13 at $12 780. Shanghai Futures Exchange was closed on Labour Day, which has a pronounced impact on trading. Since the Iran War, copper prices have been on the decline. The slowing of economic growth may affect demand for metals used in construction and electric vehicles, as well as artificial intelligence data centers. On Monday, the U.S. and Iran traded?fire as they fought for control of Strait of Hormuz. Ewa 'Manthey, commodities analyst at ING, said that the escalation between Iran and the U.S. has rekindled concerns about a broader shock - high energy prices, tighter conditions in finance, and a weakened industrial demand. She added that many investors believe the long-term outlook of copper is bullish and some buy at the lowest prices. COMEX copper futures in the U.S. gained 2.5%, to $5.99 per lb. This represents a small premium of around $130 per ton over LME Copper. Manthey pointed out that the arbitrage was pulling the metal to the U.S. The Trump administration is expected to decide on July whether or not to impose tariffs for?refined?copper, insuring it from the global risk-off stress weighing?on the LME. COMEX ?inventories On Monday, the number of short tons (or 558,692 tons metric tons) reached a record high, with 615,852 short tonnes (558,692 tons metric tons), more than doubling in just eight months. LME zinc is up 0.4% to $3,362 per ton in official activity. This seems to ignore the news that two people died in an explosion in Kazakhstan's largest zinc production facility, owned by Glencore. (Reporting by Eric Onstad Additional reporting by Pablo Sinha in Bengaluru; Editing and Harikrishnan Nair, Vijay Kishore) (Reporting and editing by Harikrishnan Nair, Vijay Kishore, and Pablo Sinha from Bengaluru)
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Oil dips as stocks rise on optimism from investors
The global stock market rose on Tuesday as a result of a string of strong earnings. Meanwhile, the oil price remained above $100 per barrel due to the'simmering hostilities' between the U.S.A. and Iran in the Strait of Hormuz. The yen was also on traders' minds after it briefly rose in the previous session, fueling speculation about another round of Tokyo intervention. The STOXX 600 index rose 0.5% in Europe. This was boosted by Anheuser-Busch shares, which surpassed expectations with their first-quarter results. Also, Unicredit, an Italian lender, reported record profits for the quarter. U.S. and Iran launched dueling maritime blockades in the Gulf as they fought for control of the Strait of Hormuz on Monday. This came shortly after U.S. president Donald Trump launched an effort to move stranded ships and tankers through the crucial energy-trade chokepoint. Maersk reported that the Alliance Fairfax, an U.S. flagged vehicle carrier operated by Farrell Lines, left the Gulf on Monday via the Strait of Hormuz, accompanied by U.S. Military assets. Oil prices, which have been slipping below the high of $115 per barrel on Monday, gave some relief to stocks and other risky assets. The renewed hostilities still jolted the markets and served to remind them that the Middle East war is far from over. Brent crude futures dropped 1.5% to $112.74 per barrel after having risen in the previous session due to increased concerns about supply disruption. The markets may be relieved today after President Trump's comments overnight that the conflict could last for two or three more weeks. Markets are likely to be sceptical, however, due to the recent escalation, and the multiple extensions of timelines for ending hostilities, since the conflict started," ING's head of commodities strategy Warren Patterson stated. S&P Global Market Intelligence data showed that 83% of S&P500 companies who have already reported had beaten the EPS estimates, and 78.2% surpassed revenue estimates. LSEG data indicates that earnings growth is expected to reach 18% for the S&P 500 in the first quarter. This compares with estimates of 12.8% a month ago. Nasdaq and S&P futures both rose by 0.7%, indicating a rebound from Monday's negative closing. Jeff Buchbinder is the chief equity strategist of LPL Financial. He said that AI-driven expenditures will continue to drive earnings growth for S&P 500, with the technology sector leading. YEN INTERVENTION MONITORING The yen has been slightly weaker today, with the dollar up by?0.3% to 157.736, following Monday's brief surge which saw the Japanese currency reach an intraday peak of 155.69. Satsuki Katayama, the Japanese Finance Minister, spoke out on Monday against speculative foreign exchange trading. This left'market participants alert to further intervention following reports that Tokyo intervened on Thursday to prop up their ailing currency. Abbas Keshvani is Asia Macro Strategist for RBC Capital Markets. He said that authorities could intervene again, if the dollar/yen continued to test 160. They have always defended this level. In 2022, Tokyo fired three volleys in just a few weeks. He said: "We believe that the intervention will only act as a 'lid on USD/JPY and not a catalyst to protracted yen strength." The Australian dollar, which is widely used as a currency, last traded at $0.7161 after the Reserve Bank of Australia raised rates on Tuesday for the third time in this year, a move that was widely anticipated. Spot gold, meanwhile, rose 1% above the low of $4,500 on Monday, which was the lowest level since March 31, to reach $4,565 per ounce. (Reporting and editing by Rae Wee, Muralikumar Aantharaman, William Maclean, Nick Zieminski, Christopher Cushing)
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Pentagon chief: ceasefire in Iran not yet over
U.S. Defense 'Secretary Pete Hegseth stated on Tuesday that the U.S. Operation to Protect Commercial Ships Against Iran in 'the Strait of Hormuz was temporary, Washington wasn't looking for a battle and the ceasefire agreement with Iran remains in place. Hegseth, a reporter, told reporters that the ceasefire was not yet over. "We promised to?defend aggressively and we have done so." Iran is aware of this, and the president has ultimate authority to decide whether or not a ceasefire violation occurs. The fragile peace in the Middle East was put under pressure?on Tuesday when the U.S. Iran and the United States exchanged gunfire in the Gulf, as they fought for control of the Strait of Hormuz. Donald Trump, the U.S. president, launched Project Freedom on Monday to take back control of the crucial waterway from Iran. Iran had effectively closed the Strait of Hormuz since the U.S., Israel and other countries started the conflict?on February 28, 2017. Hegseth stated that Iran does control the strait. "Project Freedom" is defensive in nature, a focused?scope, and a temporary duration. Its mission is to protect innocent commercial shipping against?Iranian aggression. The US forces will not need to enter Iranian waters or airspace. It is not necessary. Hegseth stated that they were not interested in a fight.
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Gold gains as oil prices ease; inflation worries linger
Gold prices rose on Tuesday, after falling to a?low of five weeks in the previous session, as oil prices fell. However, Middle East tensions remained high and inflation fears kept gains at bay. Gold spot rose 0.8%, to $4,557.75 an ounce at 1138 GMT after hitting its lowest level since Monday March 31. U.S. Gold Futures for June Delivery gained 0.8%, to $4,568.50. The oil prices fell a day after the U.S. launched a military operation to reopen the Strait of Hormuz for shipping. However, the exchanges of fire between the U.S. Ross Norman, an independent analyst, said that a pullback in oil prices on profit-taking despite the intensification of tensions in the Middle East has lifted gold from its five-week-low, as fears seem to have normalized. As the U.S. launched an attack on Iran, the fragile ceasefire appeared to be fraying once more. This was despite conflicting reports of ships passing through the Strait of Hormuz in recent days. Gold prices have been inversely related to crude since the U.S. and Israel's war against Iran began in late February. Gold is a hedge for?geopolitical instability, but rising energy costs have raised fears of inflation and reduced hopes of rate reductions, driving gold prices down by more than 13%. Investors are turning to assets that offer higher returns in high-interest rate environments. Norman stated that "although?gold?s fundamentals indicate good gains this year, the current market is in an extended phase of consolidation and is trying to establish a floor price, especially after the epic moves seen in Q1". Investors are also watching for a number of employment data this week, such as the ADP Employment Report, April payrolls and?job vacancies. These will likely determine the direction the U.S. Federal Reserve takes. Silver spot rose by 1.3%, to $73.65 per ounce. Platinum gained 1.7%, to $1978.20. Palladium rose by 1.8%, to $1506.33. (Reporting by Anjana Anil in Bengaluru; Editing by Diti Pujara and Harikrishnan Nair)
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Two Palestinians killed in Gaza by Israeli strikes, say medics
Health officials said that Israeli strikes on Gaza Strip Tuesday killed two Palestinians, and injured several others. Medical officials said that an Israeli airstrike killed a Palestinian and injured two others near the neighbourhood of Sheikh Radwan in Gaza City. Another Palestinian was also killed by Israeli tank shelling, and several other Palestinians were also wounded. Israel has not yet commented on the incidents. Israel has been attacking Palestinians almost every day, despite a ceasefire in October 2025. Israel and Hamas blame each other for ceasefire violation. Mohammed Al-Ghandour, one of the victims who died, was buried at Al Shifa Hospital. A woman comforted two?girls who were crying outside the morgue of the hospital. Abu Omar Al-Naffar, the uncle of the victim, said that "the Zionist enemy does not know what is called a truce or international laws or humanitarian law." Local medics claim that at least 830 Palestinians were killed since the ceasefire agreement came into effect. Israel, on the other hand, claims militants have killed four of its soldiers in the same time period. Israel claims that its strikes aim to stop Hamas, and other Palestinian militants from staging attacks against Israel's forces. Gaza's health authorities report that more than 72,500 Palestinians have been killed since the Gaza War began in October 2023. Most of these victims are civilians. Israel has occupied more than half of Gaza since the truce in October last year. It has forced residents to leave and destroyed almost all structures. More than 2 million Palestinians live in a small strip of land along the coast. They are mostly in tents or damaged buildings and under Hamas' de facto control.
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Utility WEC Energy’s first-quarter profits rise on higher electricity demand
WEC Energy, a utility firm, reported on Tuesday a rise in its?first quarter profit. This was largely due to an increase in the sales of electricity to both residential and industrial customers. The U.S. power consumption is expected to rise this year after reaching its second consecutive annual record in 2025. This will be primarily driven by Big Techs racing to build energy intensive data centers to support AI and homes and businesses using electricity more for heating and transportation. The company reported that the consumption of electricity by large commercial and industry customers rose by 2.7% in the last quarter, while the consumption of small commercial and Industrial customers increased by 0.7%. The residential electricity?use increased by 0.2% compared to a year ago, which boosted total retail -electricity sales by 1.3% excluding the iron ore mine. WEC, which provides natural gas and electric service to nearly 4.7 millions customers in Wisconsin, Illinois and Michigan, reported that natural gas deliveries fell by?2.1% during the first quarter. Natural gas is provided by the company through its Wisconsin Public Service and We Power units. CEO Scott Lauber said, "The execution of our capital plan and the focus on operating efficiency led to solid results in the first quarter." WEC announced in February that it would increase capital spending by $1 billion for the next five year as it increases output to power Microsoft data centers. The company's quarterly net income increased to $804.4 millions, or $2.45 a share, up from $724.2millions, or $2.27 a share, one year earlier. (Reporting by Dharna Bafna in Bengaluru; Editing by Shilpi Majumdar)
Blackstone data center deal is a target for the group that blocked New Mexico utilities merger
The group that previously blocked TXNM Energy's merger plan said this week that Blackstone Infrastructure plans for data centres in New Mexico would be a major factor in determining whether or not stakeholders will challenge the $11.5 billion proposed acquisition by the private equity group of the electric company TXNM Energy.
TXNM is a holding for regulated utilities including PNM in New Mexico. On Monday, it announced its agreement to sell with Blackstone. This was the latest in a series of recent deals in the U.S. energy industry, fueled by an increase in electricity demand due to Big Tech's AI-driven data centers.
PNM, the New Mexico Department of Justice and other stakeholders such as consumer advocates, New Energy Economy, and the New Mexico Department of Justice will have to approve the agreement.
New Energy was the driving force behind the campaign to thwart TXNM’s final agreement to sell its power to Avangrid, a U.S. subsidiary of Spanish electric company Iberdrola. Avangrid dropped its $8.3 billion bid for TXNM after the battle escalated in the New Mexico Supreme Court.
Data centers are now the main driving force for the U.S. electric demand. This is expected to hit record levels this year and by 2026.
Mariel Nanasi said that the director of New Energy Economy, Mariel, will examine the TXNM acquisition to see how Blackstone intends to capitalize on this demand in New Mexico.
Nanasi stated that Blackstone is evaluating whether it intends to build data centers directly in New Mexico or via affiliates. It will also consider how to handle the cost of upgrading the electrical systems for the large energy load.
She said, "We're going to need real guardrails to surround that."
TXNM representatives and Blackstone representatives told investors on a conference call shortly after the announcement of the acquisition that they would meet with stakeholders in the next 90-days before filing their plans with the state.
The proliferation of artificial intelligence data centres and their record-breaking electricity consumption has led to a regulatory battle over who will pay for upgrades and additional infrastructure for these giant energy consumers.
According to a person familiar with Blackstone's TXNM agreement, and speaking on condition of anonymity, the regulated utilities can power data centres, but are prohibited by state regulations from developing or owning the centers.
The person stated that the data center companies would pay for any transmission upgrades or new power generation to serve the data centers. (Reporting and editing by Rod Nickel, Laila Kearney)
(source: Reuters)