The financial week in five charts: Spiking yields, widening spreads and a long, cold winter

RON BOUSSO, ROI Energy Columnist: Europe is heading into winter with gas inventories at dangerously low levels. LNG imports have slumped since the start of the Iran war due to disrupted flows through the Strait of Hormuz, while demand from Asia has ramped back up, diverting cargoes that might otherwise have headed for Europe. Even if imports recover during the coming months, the region appears likely to enter winter with inventories well below its targeted 80% storage level. This is yet another reminder that Europe's current energy model, underpinned by imported fossil fuels, is not fit for purpose at a time when geopolitical risks are rising and energy security is becoming more important than ever. Europe does have an ambitious electrification and renewables plan, but the clock is ticking. JAMIE MCGEEVER, ROI Markets Columnist: The 30-year Treasury yield surged above 5.20% on Wednesday, the highest level in nearly two decades. While yields have been elevated for weeks, the latest move came in the wake of Federal Reserve Chair Kevin Warsh's rather confusing post-meeting press conference on Wednesday - suggesting his honeymoon is definitely over. Markets seemed to be bothered less by the central bank's actual decision - it kept rates unchanged - than by the Fed chair's convoluted language, which raised questions about whether the Fed will be willing to take the necessary actions to bring inflation back to its 2% target. No Fed Chair can allow that perception to take root, especially not one who took office under a cloud of suspicion about his independence from a White House that has explicitly called for more dovish policy. ANNA SZYMANSKI, ROI Editor-in-Charge: South Korea's chip stocks had a volatile week to end a rough month. SK Hynix and Samsung Electronics may have gotten a bounce on Friday - after Microsoft and Amazon helped calm AI capex spending fears - but they are still more than 40% and 25% below their June highs, respectively. This comes as the two tech giants released second-quarter earnings that were extraordinary - just not extraordinary enough. SK Hynix generated a sixfold rise in profit, but still missed forecasts, while Samsung reported a 250-fold rise in chip profits only to see its shares slip. In turn, South Korea's benchmark KOSPI - dominated by Samsung and SK Hynix - is down over 20% this month, even though it leapt nearly 18% on Friday. As a reminder, it has still more than doubled in the past 12 months. That's what I call volatility. MIKE DOLAN, ROI Finance & Markets Columnist: As this week's hyperscaler earnings came under close scrutiny, market anxiety focused squarely on their cash burn and the debt being raised to fund the gigantic capex cycle that's building out AI infrastructure. When does the spend become a problem? AI bulls reckon not until next year. Even they have some concerns, though. You should watch hyperscalers' debt levels and credit default swap spreads for indications of any stress, argues Societe Generale's Manish Kabra. He reckons that the increase in CDS spreads has depressed hyperscaler valuations to just 18 times forward earnings - the lowest since ChatGPT was launched in 2022. ANDY HOME, ROI Metals Columnist: The Iran war is escalating again, but you wouldn't know it from the aluminium price. After surging to a four-year high of $3,787.50 per ton in early June, LME three-month aluminium is now trading around $3,170 per ton, which is exactly where it was before the U.S. unleashed "Operation Epic Fury" on Iran on February 28. The surprising market calm over the last few days rests on a growing confidence that the loss of Gulf metal, even if protracted, can be offset by higher exports from China and Indonesia.

The financial week in five charts: Spiking yields, widening spreads and a long, cold winter

Winter is coming

Cost of credibility

Chip choke and capex questions

Aluminium looks on the bright side

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