Debt issuance tied to artificial intelligence and data center build-outs likely will remain strong, according to JPMorgan analysts, who projected that total AI-related expenditures could reach $5.5 trillion through 2030, with $4.1 trillion financed through debt. As previously covered by MSI, Wall Street has been funnelling record capital into the AI build-out across equity and debt markets. Loans currently average 85% of project costs, a high ratio that JPMorgan said is expected to drive the overall spending figure. The analysts said debt issuers are expected to tap “every single capital market” in various countries to support their growth needs. Major players — the hyperscalers — are profitable enough, the analysts said, to keep investors calm amid rising issuance. JPMorgan said it suspects the companies are borrowing heavily now to preserve their large cash reserves in case the economy worsens and borrowing costs spike.
In Europe, UniCredit’s pursuit of Germany’s Commerzbank could yield a significant earnings boost, according to Bank of America analysts Antonio Reale and Rohan Datta. The analysts said in a note that if the Italian bank achieves 50% control of Commerzbank, it would be able to incorporate the German bank’s results into its own accounts. If UniCredit ends up with full ownership, its adjusted net profit could rise to 20.5 billion euros by 2030, from 10.1 billion euros last year, they estimated. Bank of America raised its target price on UniCredit’s stock to 100 euros from 92 euros, calling it the firm’s top pick among European Union banks. UniCredit shares rose 4.1% to 77.66 euros.
Banco Santander, the largest eurozone bank by market value, still has room to grow, according to Keefe, Bruyette & Woods analysts Hugo Cruz and Ben Maher. In Europe, the market appears to reward scale, and Santander is best placed among its peers to claim the crown for scale, the analysts said in a note. They said Santander has strong local franchises, but the global businesses it recently built up hold the greatest potential to drive revenue growth, cost savings, and capital generation. KBW lifted its target price on Santander’s stock to 13.30 euros from 11.80 euros. Shares rose 1.3% to 11.60 euros.
Morgan Stanley analysts said history suggests Australian banks’ valuation multiples could fall further. In a note, they told clients that the average earnings multiple of the country’s four largest banks has fallen by 2.6 points since the Reserve Bank of Australia began raising interest rates in February, to 18.3 times earnings. That compares with a 3.5-point de-rating in 2022-2023 and a 6.0-point de-rating in 2009-2010, they observed. The analysts acknowledged that there have been fewer rate rises in this cycle, but added that multiples were more stretched at the start this time around. They said current trading multiples remain hard to justify.
The Bank of Japan on Tuesday raised rates to their highest level since 1995. BlackRock Investment Institute’s Ben Powell said the BOJ will likely proceed with further rate hikes carefully. Domestically, solid wage growth, firm underlying inflation, and deeply negative real rates support the case for tightening, Powell said. Abroad, hopes of de-escalation in the Middle East temper the threat of a sustained energy shock, which should help contain imported inflation. BlackRock said it remains underweight Japanese government bonds, expecting rate hikes, high global term premia, and heavy issuance to keep upward pressure on yields. The firm is neutral on Japan equities on a six-to-12-month horizon, as imported energy costs could still weigh on returns.
Daiwa Securities economist Kento Minami said the BOJ likely believes interest rates are still sitting far from neutral levels, as the central bank reiterated that financial conditions remain accommodative after the hike. “The Bank of Japan’s fundamental policy stance has remained largely unchanged since its April meeting,” Minami said. Still, the central bank’s view that underlying consumer inflation may exceed its 2% price stability target suggests a potential acceleration in the pace of rate hikes if such risks heighten, he added. Investors widely expect the bank to lift interest rates roughly once every six months under its baseline trajectory.
In China, New China Life’s 2026 earnings could rise sharply on a stronger investment income outlook, according to China Galaxy International analysts. They expect recent premium growth trends and strong equity-market gains since end-March to boost the Chinese insurer’s 2026 earnings per share by 117%. The analysts also estimated the company’s new business growth at 12% to 16% over 2026 to 2028, but flagged its sensitivity to near-term regulatory headwinds and its mix of investments classified at fair value. China Galaxy International raised its target price to 52.70 Hong Kong dollars from 28.60 Hong Kong dollars on higher return-on-equity and return-on-embedded-value projections, but retained its hold rating. Shares last closed 0.7% lower at 52.85 Hong Kong dollars.
China’s May activity data suggests the country’s two-speed economy — weak consumer demand on one hand and booming exports and high-tech investment on the other — is diverging further, said Danske Bank chief analyst Allan von Mehren. The figures strengthen the case for additional consumption-focused stimulus, he said, though it remains unclear whether Beijing will act as external demand continues to support growth and deflationary pressures ease. Danske Bank expects consumer spending to remain subdued until the housing-market correction runs its course. “While we see scope for stabilization this year in [property] sales and prices, it will take time before we see a revival of the Chinese consumer,” von Mehren said.