Oil swings and AI soars: US markets hit new highs

Summary

Moving Markets – Oil Swings and AI Soars: US Markets Hit New Highs

Julius Baer Podcast | Episode Date: May 28, 2026
Host: Bernadette Anderko
Guests: Roman Canciani (Head of Product and Investment Content), Carsten Menke (Head of Next Generation Research)

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Episode Overview

This episode delivers a concise-yet-informative roundup on key global market movements over the past 24 hours, with a dual focus:

• The contrasting fortunes of European and US equity markets, especially the surge in the US driven by the AI boom
• An in-depth investigation into the copper rally and its underlying drivers

Roman Canciani provides a broad global markets update, then Carsten Menke discusses what’s behind copper’s recent record highs.

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Key Discussion Points & Insights

1. European Market Update: Muted Sentiment & Energy Price Anxiety

Speaker: Roman Canciani

• Market Performance:

  • The STOXX 600 ended nearly flat amid balanced sector performance.
  • Gains in automobile and chemicals were offset by concerns over Middle East tensions and their effect on energy prices.

• Oil Price Dynamics:

  • Brent crude fell ~3% during the day, but the underlying uncertainty remains due to fluctuating reports about agreements and ceasefires.
  • Energy dependency is a particular vulnerability for Europe.

• ECB’s Caution:

  • ECB warns that ongoing conflict and trade tensions could hamper Eurozone growth, increase borrowing costs, and strain public finances.
  • "They rightly point out that Europe is particularly exposed due to its reliance on energy imports, and that vulnerability is definitely a concern." ([01:33] Roman Canciani)

• German Economic Outlook:

  • Germany’s Council of Economic Experts slashed 2026 growth forecasts from 0.9% to 0.5%.
  • Rising energy costs squeeze household budgets, lift inflation (now projected at 3% for 2026).
  • An oil price rise to $120/barrel would worsen the forecast, possibly pushing inflation above 3.5%.
  • Urgent structural reforms are needed to sustain competitiveness, especially versus China.

2. US Markets: AI Leads the Charge

Speaker: Roman Canciani

• Record Highs & Predictions:

  • US equities, especially the S&P 500, hit new highs on AI enthusiasm.
  • "Strategists at Goldman Sachs, joining others like Morgan Stanley and Deutsche bank, are predicting the S&P 500 could reach 8,000 points by year end, a roughly 6% gain from current levels." ([02:51] Roman Canciani)
  • The rally is underpinned by strong earnings and AI-driven infrastructure investment, expected to contribute around half of S&P 500 EPS growth this year.

• Notable Stock Moves:

  • Snowflake (software) jumped ~30% after a strong outlook, illustrating AI optimism spilling into individual shares.

3. Foreign Exchange: Yen Pressure & Safe Haven Flows

Speaker: Roman Canciani

• Japanese Yen:

  • The yen nears 160/USD—levels that led to intervention in the past.
  • BoJ’s Governor Ueda hints at hawkishness; markets now price a 70% chance of a June rate hike.
  • Ongoing pressure as investors test the BoJ’s resolve.

• Safe Havens & Geopolitics:

  • The US dollar strengthens on safe haven demand due to heightened geopolitical risk.
  • "Asian markets are reacting negatively to fresh US strikes in Iran and retaliatory action. So oil prices are surging." ([04:40] Roman Canciani)

4. Commodities: Oil and Gold Market Movements

• Oil:

  • Brent rises 3% overnight to $97/bbl following geopolitical incidents.

• Gold:

  • Surprisingly soft, with gold dipping to just below $4,400.

• Asian Equities:

  • Initial sharp sell-off in response to overnight events, then a partial recovery. Most indices remain slightly under 1% down.

5. Market Outlook: Anticipating US Core PCE & Fed Moves

Speaker: Roman Canciani

• Today’s Key Focus:
  • Eyes are on the US core PCE data (Fed’s preferred inflation gauge) for clues on inflation trajectory.
  • Recent Fed commentary signals a willingness to tighten policy further if needed.
  • US equity futures up slightly but anticipate a negative open.

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6. Copper Rally: Under the Microscope

Speaker: Carsten Menke

• Copper Hits Record Highs:

  • Prices broke $14,000/tonne.

• Dissecting Explanations:

  • No single convincing cause; several narratives float but are unpersuasive:
    1. Middle East conflict: Disruptions to sulphur exports (vital for some copper mines); no direct mining impact seen.
    2. Peru Energy Crisis: Quick fix of pipeline rupture; current funding worries at state oil company not (yet) impacting mining due to government action.
    3. AI-driven Demand:
       • The AI boom is real, but "data centres use less copper than perceived ... globally they only account for 1% of total demand." ([07:35] Carsten Menke)
       • Copper demand from tech is weakened by advances in power management (less copper use) and substitution (shift to aluminum), plus the move to fiber optics for data.

• Core Demand Driver:

  • "Rather than seeing data centers as a standalone driver of demand, we prefer to look at the electrification trend more broadly ... renewables, EVs, the required upgrading of the power grid, etc." ([07:35–08:32] Carsten Menke)
  • This broad electrification theme is seen as the main long-term support.

• Inventory and Market Surplus:

  • Despite bullish prices, copper is in surplus this year.
  • "Global observable inventories [are] at the highest levels in more than 20 years." ([08:36–08:54] Carsten Menke)
  • Inventory build-up is mainly in exchange warehouses—a sign of cyclical softness, especially in China.
  • US traders may be stockpiling ahead of potential tariffs.

• Reconciling Record Prices with Surplus:

  • "Prices are primarily about the long term outlook ... structural deficits ... The surplus is about the short term backdrop, which is cyclically soft but seemingly disregarded by those that are playing the structural growth story." ([09:48] Carsten Menke)
  • Julius Baer maintains a cautious short-term stance despite agreeing with the bullish long-term narrative.

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Notable Quotes

• “Gains in auto and chemical stocks were offset by lingering anxieties surrounding the situation in the Middle East and its potential impact on energy prices.”
  — Roman Canciani [00:46]

• “The S&P 500 could reach 8,000 points by year end, a roughly 6% gain from current levels... It’s fueled by strong earnings growth, with companies benefiting from AI.”
  — Roman Canciani [02:51]

• “Data centres use less copper than perceived. Globally they only account for 1% of total demand ... rather than seeing data centers as a standalone driver, we prefer to look at the electrification trend more broadly.”
  — Carsten Menke [07:35–08:32]

• “Global observable inventories at the highest levels in more than 20 years ... primarily as a sign of cyclical softness, in particular in China, where manufacturing activity is struggling.”
  — Carsten Menke [08:36–08:54]

• “Prices are primarily about the long term outlook ... The surplus is about the short term backdrop which is cyclically soft but seemingly disregarded by those that are playing the structural growth story.”
  — Carsten Menke [09:48]

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Key Timestamps

• [00:46] — European market reaction to energy price anxiety and ECB caution
• [01:45] — German economic outlook and impact of energy costs
• [02:51] — US record highs, AI enthusiasm, S&P 500 forecasts
• [03:53] — Yen pressure and potential Bank of Japan action
• [04:40] — Oil/gold reaction to renewed Middle East tensions
• [05:29] — Preview of US core PCE data release
• [06:16] — Copper market analysis begins
• [07:35] — Copper demand, AI, and the electrification thesis
• [08:32] — Copper inventory build; strategic stockpiling discussed
• [09:48] — Disconnect between copper prices and physical surplus

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Summary

This episode highlights the divergence between cautious, risk-averse European markets and the AI-fueled exuberance in US equities, amid a global backdrop of energy insecurity and geopolitical tension. Roman Canciani gives a grounded tour through recent moves in stocks, currencies, oil, and gold, closing with a preview of key US inflation data due. Carsten Menke then unpacks the copper price rally, debunking the most-hyped causes and urging caution in the short term despite robust long-term trends. The discussion is punctuated by clear, data-driven skepticism and emphasizes broad structural trends—especially electrification—as key to future commodity markets.

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For market participants, this episode underscores the importance of distinguishing long-term structural themes from short-term cyclical noise, especially as narratives about AI and commodities swirl across global markets.

Transcript

[A]

Welcome to Julius Baer's Moving Markets podcast on Thursday 28th May, with me, Bernadette Anderko. I'm looking forward to catching up on the latest financial markets news with Roman Canciani, head of product and Investment content here at Julius Baer this morning. And then we're going to be joined by our head of Next Generation Research, Carsten Menke, to investigate what's behind the recent copper rally. Now, though, let's catch up with what's been going on in markets in the last 24 hours. Good morning to you, Romain.

[B]

Good morning, Bernadette.

[A]

So, let's start with a quick look back at European markets. Yesterday we saw a fairly muted performance despite some positive signals elsewhere. Can you talk us through the key themes influencing investor behavior?

[B]

Certainly. Well, European markets essentially treated water yesterday with the stock 600 barely budging. Gains in auto and chemical stocks were offset by lingering anxieties surrounding the situation in the Middle east and its potential impact on energy prices. Brent crude did fall during the day around 3%, offering a bit of relief, but the underlying uncertainty persists. Reports regarding potential agreements and alleged ceasefires are constantly shifting, keeping everyone on edge. The ECB also weighed in, cautioning that the conflict, coupled with existing trade tensions, could hinder Eurozone growth, push up borrowing costs and strain public finances. They rightly point out that Europe is particularly exposed due to its reliance on

[A]

energy imports, and that vulnerability is definitely a concern. But speaking of broader economic health, Germany, often seen as the engine of Europe, received some sobering news, didn't it? So what's the outlook looking like there?

[B]

Well, it's not pretty, unfortunately. Germany's Council of Economic Experts significantly lowered their growth projections. They now anticipate only 0.5% growth in 2026, down from 0.9% previously. Higher prices stemming from the Middle East's instability are a major factor, along with uncertainties related to U.S. trade policies and deeper structural issues. Within the German economy, rising energy costs are squeezing household budgets and curbing consumer spending. Inflation is predicted to creep up to 3% in 2026. Even a moderate increase in oil prices, say to US$120 a barrel, could slash growth even further and push inflation above 3.5%. The council emphasized the need for structural reforms to boost Germany's competitiveness, especially against countries like China.

[A]

A challenging landscape for Europe's largest economy. But now, why don't we head across the Atlantic? US Markets painted a very different picture yesterday, hitting record highs. So what's driving that optimism?

[B]

The story in the US is largely centred around artificial intelligence. Strategists at Goldman Sachs, joining others like Morgan Stanley and Deutsche bank, are predicting The S&P 500 could reach 8,000 points by year end, a roughly 6% gain from current levels. Importantly, it isn't just blind enthusiasm. It's fueled by strong earnings growth, with companies benefiting from AI. Infrastructure investment expected to contribute substantially around half to the S&P 500's EPS growth. Though the projection suggests valuation compression, the sheer force of AI seems to be carrying the market upwards. We also saw some interesting individual move offers yesterday with software company Snowflake jumping around 30% in late trading after a surprisingly strong outlook.

[A]

Interesting, it seems that everything AI keeps on being the defining feature of this market cycle. Anyway, let's turn to currencies. The Japanese yen has been under considerable pressure. What's going on there?

[B]

Yes, the yen continues to weaken, nearing levels around 160 to the dollars that previously prompted intervention from Japanese authorities. Investors seem determined to test the bank of Japan's resolve. Simultaneously, Governor Ueda has taken a more hawkish stance, acknowledging the sustained energy price shocks combined with wage increases and inflation might necessitate market action. So markets are currently pricing in a substantial chance around 70% of a rate hike at the BOJ's June meeting. Meanwhile, the US dollar benefited from its safe haven status amidst the heightened geopolitical tensions.

[A]

And those tensions certainly flared up overnight, didn't they? News coming out of Asia paints a concerning picture.

[B]

Absolutely. Asian markets are reacting negatively to fresh US strikes in Iran and retaliatory action. So oil prices are surging. Brent is currently trading around US$97, up around 3% overnight. Safe haven assets like the dollar are gaining traction over while gold has actually dipped as investors reassess risk. It's trading now just shy of US$4,400 on a very important technical support line, I am told US treasury yields meanwhile are trading a tick lower too. Major Asian indices experienced a significant decline this morning, reflecting the increased anxiety, but have since recovered a bit. Still, they are generally down a little bit less than 1% as we speak.

[A]

Alright then. Finally, looking ahead to today, what key event should investors be focusing on?

[B]

Well, all eyes will be on the US core PCE data released later today. This is the Federal Reserve's preferred measure of inflation and it will provide crucial insights into whether inflationary pressures are cooling as expected. This comes after comments from Fed Governor Cook expressing vigilance about entrenched inflation and preparedness to raise rates if needed. Otherwise, there's not too much on the plate, maybe. Lastly, US equity market futures have ticked up over the last hour or so, but still point to a negative open when trading resumes later today. That's it from me.

[A]

Thanks very much for a very thorough update this morning, Roman.

[B]

Thank you very much, Bernadette. It's always a pleasure.

[A]

And now over to you, Carsten. Good morning.

[C]

Hello. Good morning.

[A]

So, Carsten, copper prices reached a new record high of more than US$14,000 per tonne recently. What's behind that rally?

[C]

To be honest, I have come across many potential explanations, but none of them was fully convincing in my view. So first, we have the conflict in the Middle east, which is a major exporter of sulphur. Sulphur is an important ingredient to some specific copper mines and supplies have been disrupted due to the shipping issues around Hormuzen, as we know. That said, I'm not aware of any related mining disruptions. Second, there is an energy crisis in Peru, which is an important copper producer, but this is unrelated, by the way, to the conflict in the Middle East. So in March there was a pipeline rupture which was fixed quite quickly and this did not impact mining. Now we're talking about funding issues at the country's state owned oil company, which does not pose a big risk to mining, in my view. Of course, unless the company fails and the mines run out of diesel, for example. And this is exactly why the government has stepped in to avoid fuel supply disruptions. And third, there is of course, the AI boom.

[A]

Yeah, indeed. And isn't that what's driving the euphoria around copper?

[C]

Yes, I think so. That said, and I think I'm repeating myself here, data centers use less copper than of copper, perceived. So globally they only account for 1% of total demand. Plus power transmission is becoming less copper intensive by incremental innovation of power management systems or also substitution with aluminium. And data transmission is moving from traditional copper cabling to high performance optical transmission. So rather than seeing data centers as a standalone driver of demand, we prefer to look at the electrification trend more broadly. So incorporating the rise of renewables, electric vehicles, the required upgrading of the power grid, et cetera. And for us, this is the strongest structural force in the copper market.

[A]

And yet I get the sense that that doesn't convince you.

[C]

Well, we are convinced about this trend, absolutely. But if we look at the copper market today, or if we look at the copper market this year, it was in a sizable surplus. And this has pushed global observable inventories to the highest levels in more than 20 years.

[A]

Is that Maybe due to strategic stockpiling. I mean, that's something we hear from time to time.

[C]

I think it's unlikely because much of this inventory buildup has been happening in exchange warehouses, which are considered a market of last resort that clears excess supply or demand. This is why we see increasing inventory primarily as a sign of cyclical softness. In particular, in China, where manufacturing activity is struggling, some of the increase in inventory is still tied to potential US Import tariffs. So if we look at US Warehouses where traders have been shipping metal to the US Storing it there with the intention to sell it at a potentially higher price at a later point in time.

[A]

Okay then, so how do you square record high prices with a surplus market?

[C]

I'd say that prices are primarily about the long term outlook, which still points to structural deficits during the next few years. And the surplus is about the short term backdrop, which is cyclically soft but seemingly disregarded by those that are playing the structural growth story. We generally agree with them in terms of the long term outlook, but still from a more short term perspective, we believe that prices are trading above what is justified and that's why we stick to our cautious view.

[A]

Clear message there. Carsten, thank you as always for joining us.

[C]

Thanks for having me. Bye bye.

[A]

Well, that's it for today's podcast. Thank you for listening and of course to Roman and Carsten for being with me today. I hope you enjoyed the conversation. Please do tune in again tomorrow when Helen Freer will be back hosting more of our experts to bring you up to speed on what's moving markets. So don't miss that. Meanwhile, good luck today and goodbye for now.

[D]

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