TheChek News Flow

DAX:

MDAX:

SDAX:

$100bn stock swings expose ‘fragility’ beneath Wall Street rally

Options and ETF frenzy have helped make largest US stocks more volatile, raising stakes ahead of Big Tech earnings

Daily share price swings worth hundreds of billions of dollars are becoming commonplace on Wall Street, highlighting the risks to investors as the Big Tech companies powering the stock market’s relentless rally grow more volatile.

Individual stocks have gained or lost more than $100bn in market value in a single day 119 times so far this year, the highest annual total on record.

The rise of 12-figure stock swings partly reflects the huge size of companies such as Nvidia, Microsoft and Apple, which are all worth more than $3tn each and account for the bulk of the huge moves.

But even accounting for the stock market’s growth, the size of this year’s moves has been extraordinary. Bank of America analysis shows that 2025 has already punched through 2024’s record number of what it calls “fragility events” in Big Tech stocks, when share prices move well outside their usual range.

“We have large-cap stocks moving 10, 20, 30 per cent in a day,” said Abhi Deb, head of global cross-asset quant investment strategy at BofA. “That kind of price action used to be rare.”

The volatility of the biggest stocks has raised the stakes as five tech giants worth a combined $15tn — Meta, Alphabet, Microsoft, Apple and Amazon — report quarterly earnings this week. “The downside could be quite brutal” if the companies disappoint markets, said Valérie Noël, head of trading at Syz Group.

Despite the big individual stock moves, overall market volatility has mostly remained muted as the S&P 500 has rebounded to a series of record highs from April’s heavy sell-off because big stocks have tended not to all swing in the same direction.

The “warning sign” would be if this changed, said Deb. “If you get a macro shock where stocks move in unison, the index will move a lot more.”

This year’s tally of stock moves of $100bn or more is the highest on record, and compares with 84 for all of last year and 33 during the bear market of 2022 when the S&P tumbled by almost one-fifth.

A big driver of the share price moves is the derivatives market, where retail investors and hedge funds have been piling into short-term bets on single stocks around earnings and macro events, according to Goldman Sachs. This forces market makers to hedge themselves by putting on their own positions, which can exacerbate moves in share prices.

The volume of trading in single-stock options this month reached its highest level since the 2021 meme-stock craze, Goldman data shows, with retail investors accounting for 60 per cent of this market.

Single stock and leveraged exchange traded funds — for example, funds that offer two or three times the return of a single stock each day — have also sucked in assets this year, adding extra leverage. Earlier this month, Volatility Shares filed to launch ETFs with five times leverage on stocks including Nvidia, Alphabet and Tesla.

Analysts say leveraged products exacerbate price movements because issuers have to buy more exposure to a stock if the price rises, or sell if it falls, on a daily basis in order to maintain a fund’s target leverage ratio.

“These $100bn-plus stock swings have become far more common” because of “the rise of quantitative trading strategies, zero-day options and double or triple-leveraged ETFs on single stocks”, said Noël.

The churn beneath the surface has tended not to translate into a more volatile index this year. Although Wall Street’s “fear gauge”, the Vix, briefly spiked earlier this month after a flare-up in US-China trade tensions, the US equity market had enjoyed its least volatile quarter since 2018 in the three months to September.

Current market themes such as artificial intelligence, tax changes and the global trade war have hurt some stocks while boosting others, said John Marshall, head of derivatives research at Goldman Sachs. That has contributed to “ultra-suppressed” levels of correlation between stocks this year, according to UBS, meaning the moves have little impact on overall market volatility.

But sharp moves in individual stocks could start to pose a greater risk to market stability if that correlation picks up again and these big stocks potentially witness a co-ordinated sell-off, warn analysts.

Maxwell Grinacoff, head of US equity derivatives research at UBS, saw the potential for a “flows cascade”, where traders positioned for further price rises quickly have to dump their positions.

JPMorgan analysts estimate that on October 10, when Wall Street suffered its sharpest one-day sell-off since April, leveraged ETFs were forced to sell $26bn of equities when the market closed in order to maintain their fixed leverage requirements.

“I think the risk is things become too frothy, too exuberant and everything starts going up in tandem,” said Grinacoff. “The second you have an unknown unknown derail everything, it can all move in the opposite direction at once.”

Tech giant’s high-margin unit has doubled in size over the past five years

Apple is set to top $100bn in annual revenues from its services business for the first time this year, despite mounting legal and regulatory pressure on its App Store.

The services unit — which includes iCloud, Apple Pay and AppleCare insurance — is expected to deliver annual revenues of $108.6bn in the year to last month, according to analysts’ consensus estimates from Visible Alpha, up around 13 per cent from the year before.

If Apple hits those numbers when it reports its fiscal fourth-quarter results this week, that would make its services division alone larger than the entire annual sales of Walt Disney, Tesla or Tencent this year.

Apple’s high-margin services business, which is primarily overseen by long-serving executive Eddy Cue, has doubled in size over the past five years, making it a vital source of growth at a time when iPhone sales have become less dependable.

Services are on track to make up a quarter of Apple’s revenue but as much as 50 per cent of its profit, said JPMorgan analyst Samik Chatterjee, reflecting the “stickiness” of products such as Apple Pay and recurring payments for iCloud storage.

“Engagement of consumers [is] continuing to increase on iPhones, with growth not only driven by growth in the installed base but also higher monetisation per device,” Chatterjee added.

The unit has also been boosted by a multibillion-dollar deal with Google to make it the default search engine on iPhones and other devices.

That deal was largely spared in September’s US court order following the US Department of Justice’s antitrust victory against Google. The judge’s ruling stopped short of banning Google from sharing advertising revenues with partners, to the huge relief of Apple investors.

But Apple’s own US anti-competition case from the justice department looms over its services business, alongside new regulations in the UK and Europe that could curtail its App Store fees of up to 30 per cent on digital goods purchases.

The US DoJ claims that Apple is using a smartphone monopoly to quash competition and restrict consumer choice, including via its App Store rules, as well as in smart watches and mobile payments.

The tech giant is also still fighting a US legal case brought by Epic Games that seeks to pry open its App Store. The company is appealing an April order when a judge referred Apple to a criminal prosecutor for deliberately thwarting her injunction.

A UK tribunal last week ruled that the US Big Tech group had abused its “near absolute market power” in iOS app distribution and in-app payments, a judgment that could force it to pay out damages of as much as £1.5bn to millions of British consumers. Apple said the ruling was “flawed” and plans to appeal.

The UK competition regulator also said last week it will place Apple’s mobile platform under the oversight of Britain’s tough new digital markets regime, which could force it to allow alternative app stores or new payment systems on the iPhone.

Apple has consistently argued that its tight control of the iPhone’s software and services is vital for customers’ security and privacy, as well as its curation of the App Store and provision of digital tools for developers. The company offers a reduced 15 per cent fee for paid apps and in-app purchases from smaller developers and certain digital subscriptions.

Despite the legal challenges, analysts expect services to make up a larger portion of Apple’s overall business in the coming years, as it expands its media arm into live sports, such as with its recent $700mn deal to stream Formula 1 races in the US, and readies a revamp of its virtual assistant Siri.

Services are forecast to make up more than 30 per cent of Apple’s revenues by the end of the decade, when the unit’s sales could be as much as $175bn, according to Visible Alpha estimates.

By comparison, the iPhone makes up around half of Apple’s expected $415bn in total annual sales in its 2025 fiscal year, with smartphone growth expected to be around 4 per cent.

Digital goods and subscriptions command a high profit margin — even more than Apple’s premium-priced hardware. Gross margins for services are expected to hit 75 per cent in the most recent financial year, Visible Alpha data suggests, compared to 40 per cent for the iPhone. That has helped Apple to steadily improve its overall gross margin from 38 per cent in 2020 to around 47 per cent this year.

Bechtel boss urges US government to share risk of nuclear build-out

Danger of cost overruns is obstacle to financing Donald Trump’s plan for 10 new reactors by 2030

The construction group that rescued the last big US nuclear energy project from bankruptcy has called on Washington to share the risk of cost overruns to deliver Donald Trump’s “American nuclear renaissance”.

Bechtel president Craig Albert told the Financial Times industry could deliver on the president’s executive orders to start work on developing 10 large-scale nuclear reactors by 2030. But government and the private sector would need to work together to overcome financing hurdles linked to risks of cost overruns and delays.

“The advice we’ve been giving the government is . . . there is overrun risk, and no one company can take it all because they’d be betting their company,” he said in an interview.

“The government has provided very good tax incentives that improve the rate of return, but that doesn’t address overrun risk, that just improves the rate of return. So, I do think the government will have a role to play.”

The last two nuclear reactors built in the US at Plant Vogtle in Georgia faced several years of delay and cost more than double their original $14bn budget, forcing reactor designer Westinghouse to file for Chapter 11 bankruptcy protection in 2017. Bechtel was later selected to complete construction of the project — the first nuclear reactor built from scratch in the country in more than 30 years.

The private company, which has been run by the Bechtel family since its founding in 1898, also faced delays and overruns on Vogtle, underlining the complexity and risk involved in large-scale nuclear projects.

Albert said the experience at Vogtle left Bechtel well positioned to lead the revival of nuclear power in the US, which was being driven by surging energy demands linked to the artificial intelligence boom. But he said all players — construction companies, reactor developers, the hyperscalers who want to buy power and the government — would need to get in a room and agree how to share this risk.

Albert said Bechtel was willing to change its approach to contracting and take on more risk.

“All the nuclear power projects that we’ve ever built in our history were done on a cost-reimbursable basis, where we took ‘no cost’ risk . . . We’re actually revisiting that going forward because we are part of that team that’s got to make this happen.”

“We are right now revisiting what parts of our work can we have enough certainty about and have the ability to control, such that we can take the overrun risk for that work. And if everyone takes some overrun risk . . . I think there is a solution here.”

In May Trump directed the nuclear industry to fast-track construction of large and small nuclear reactors in an attempt to quadruple US nuclear capacity by 2050. This has energised the sector, enabling companies to raise billions of dollars in capital to help build multiple projects.

But the industry’s poor record of delivering nuclear projects on time and on budget in western nations is a hurdle, say experts. In the UK, for example, Hinkley Point C, a nuclear plant developed by EDF, is forecast to cost £46bn, compared with initial estimates of £18bn.

The Nuclear Energy Institute, an industry group, backs a draft bill introduced to US Congress last year which includes financial measures to mitigate overrun risks to unlock project financing for nuclear projects.

“Policies that mitigate potential construction cost overruns for early movers and first-of-a-kind projects . . . can enhance confidence and stability for investors,” said the NEI’s John Kotek.

Under the draft bill, which has lapsed and would probably require bipartisan support if it is reintroduced, the first 20 per cent of overrun costs would be borne by the project. Then a delayed 50:50 cost share would kick in with the maximum government contribution capped at $1.2bn, according to an analysis by ClearPath, an non-governmental organisation lobbying to promote cost overrun insurance.

However, some experts believe cost overrun insurance creates moral hazard and other mechanisms, such as milestone-based financing from government, are better.

“Industry needs to properly cost a project and manage the project,” said Adam Stein at The Breakthrough Institute, a think-tank. “Instead of an insignificant protection on the back end that won’t actually protect ratepayers, we should solve the root cause.” 

Albert said the key to delivering nuclear projects on time and on budget was to adopt an integrated approach to engineering, construction and procurement.

“The model of design and then bid and then build — it does not work for complex jobs like nuclear,” he said, citing the example of Vogtle.

To succeed companies would have to assemble the right proportion of trained craftspeople to ensure high-quality work. They would have to pull together supply chains early in the process and be proactive about risks, said Albert.

“We are not trying to come up with a price that looks attractive to somebody. We’re coming up with a price that is accurate. We don’t want people investing billions of dollars and then running into surprises . . . The Vogtle job, it should have been estimated higher,” he said.

Bechtel’s experience in building multiple liquefied natural gas plants in the US and elsewhere provides a blueprint for success in beginning construction on multiple nuclear units, said Albert.

“We have to be really smart about the sequence, really deliberate about the actions. But you know, when you think back to LNG, I remember when we could only do one LNG plant, well now we have six at once.”

Italian pacifists stymie Europe’s plan to boost ammunition production

Anti-establishment politicians oppose expansion of Rheinmetall plant in Sardinia

Europe’s drive to boost its ammunition production has run into political resistance in Italy, where local officials are opposing Rheinmetall using new production lines at its explosives plant in Sardinia.

The German defence company’s local subsidiary, RWM Italia, has been waiting six months for Sardinian authorities to clear its use of new production lines at the plant, which has been working round-the-clock to meet demand from Ukraine and other European militaries. 

The new lines would sharply increase output at the plant in Domusnovas, and government technical experts deemed the new facilities, including an explosives testing field, environmentally acceptable in April.

But Sardinia’s regional council — led by the leftwing populist Five Star Movement — has refused to approve it and demanded more information, citing criticism from local environmentalists and anti-war activists.  

“What we need to ask ourselves is: Do we want to be in a war economy?” said Alessandra Todde, Sardinia’s regional president and Five Star politician. The party’s leader Giuseppe Conte is also critical of Europe’s rearmament, which he claims is delivering windfall profits to Rheinmetall and other arms makers to the detriment of social spending.

The stand-off highlights the difficulties in increasing European arms production in Italy, one of Europe’s major industrial powers, given the country’s strong environmental and pacifist movement. It is also part of a broader reckoning in Europe as governments divert public funds to defence to counter the Russian threat and make up for fading US security guarantees.

Prime Minister Giorgia Meloni is a strong defender of Ukraine and has supported using EU funds to bolster the country and the continent’s defences against Russian aggression. Local lawmakers from rightwing Brothers of Italy party have condemned Five Star’s stalling tactics, with Antonella Zedda, a parliamentary member from Sardinia, describing their stance as “fake pacifism”.

“They think, ‘no weapons, no wars.’ But it’s not like if we don’t make weapons in Sardinia, wars will stop,” Zedda said.

Alessandro Marrone, a defence analyst with Rome’s Institute of International Affairs, said grassroots opposition, coupled with Italy’s notorious bureaucracy “makes it more difficult to boost industrial production” in the arms sector.

“Local authorities or political parties that are against defence production — whether for ideological purposes, environmental concerns, or just to oppose the government — have lots of leverage,” he added.

Rheinmetall did not immediately respond to a request for comment.

In a 2023 cost-benefit analysis seen by the FT, the company insisted the expansion was “not motivated by mere profit requirements, but by the need to expand production capacity . . . to be able to supply the national, European, and allied armed forces with what they need in shorter times and at lower costs than in the past’’.

The German defence company has operated at Domusnovas since 2010, when it bought an old factory that made explosives for Sardinia’s mining industry, and began producing arms there including underwater mines and munitions.

In 2018, it obtained permission from local authorities to build new production lines and a small explosives testing field, for which it planned to hire another 250 workers.  

However, the new facilities have been lying idle, tied up in legal challenges mounted by environmental and pacifist groups.

Italy’s top administrative court, the Council of State, ordered a full environmental impact report on the expansion in 2021, after activists argued that the project had been intentionally split into smaller proposals to qualify for fast-track approval which does not require comprehensive assessments.

Environmental activist Graziano Bullegas accused Rheinmetall of having a ‘‘colonial’’ approach.

“They made an entire plant without any of the necessary authorisations thanks to this complicity on the part of the local authorities,” he said. 

The post-facto environmental assessment, approved by technical experts, was finally sent to the regional council for formal ratification in April. But last month, the council requested fresh analysis from 10 different government departments.

“The regional council is in difficulty because . . . the Five Star Movement doesn’t want to approve a resolution that says ‘we can produce weapons in Sardinia’,” said Zedda. Instead, the council was using “bureaucratic tricks” to avoid the approval, she added.

RWM won a court ruling this month ordering the council to act within 60 days, with a warning that an independent commissioner could be appointed in case of further delays. 

If the expansion gets the go-ahead, local activists have pledged to keep up the legal battle. 

“We don’t have to have a multinational company coming here to produce bombs,” said Arnaldo Scarpa, a schoolteacher and activist with the pacifist Committee for the Reconversion of RWM, which wants the plant returned to civilian use. “You cannot use war to resolve controversies between the nations.”

Zedda said the saga sends an alarming message to investors — including arms makers — at a time when Sardinia badly needs the kind of well-paid manufacturing jobs that could come from the European spending boom.

“The message that Sardinian politicians are sending is peculiar: you can’t have free enterprise in Sardinia if what you produce doesn’t please the wider community,” she said. “You’re putting a spoke in your own wheels with bureaucracy.”

Clarity on regulations and how they are applied are needed as much as simplification

The buzzword in Europe today — for speeding up the EU integration process and implementing reform recommendations made in reports by Mario Draghi and Enrico Letta — is “simplification”. This, according to policymakers, should not mean “deregulation”.

Several working groups have been set up to make concrete proposals to simplify Europe’s legislative and regulatory framework. Yet, judging from what has been achieved so far, there’s a real risk that all this effort will produce only modest results.

Simplifying rules in the financial sector is no easy task. What’s really needed, instead, is to make them clearer and consistent with the goals policymakers seek to achieve. Indeed, the real problem today lies in a lack of clarity, which leaves too much room for discretion and differing interpretations from one country to another — and even at the European level. This confusing inconsistency undermines the broader objective of building a fully integrated EU market for savings and investment.

Let’s take a practical example. One of Europe’s long-standing economic weaknesses is the absence of a well-functioning capital market capable of adequately financing businesses, particularly small and medium-sized enterprises. Bank balance sheets are simply too limited to meet all financing needs.

One effective way to expand the financing capacity for corporates would be to promote the securitisation of bank loans, enabling banks to sell these assets on the market or to specialised investors such as private credit — a sector that is growing rapidly, including in Europe.

This process allows capital to be freed up, enabling banks to extend new loans. These financial instruments make more efficient use of bank capital and transfer credit risk to non-bank institutions which can manage it more flexibly, reducing the concentration of risk. In the US, securitisation markets have developed significantly — after being reformed following the 2008 crisis. In Europe, instead, this instrument remains underused.

The reason lies in the lack of regulatory clarity. Specifically, European rules fail to define in a precise way how certain key parameters for securitisation should be applied, in particular concerning the proportion of revenues and risk that must be retained by the credit originator (the so-called Risk Retention Requirement).

Such a requirement is meant to ensure an alignment of interests between the entity selling its assets via securitisation and the investors. It mandates that a portion of the risk is retained by the seller in an entity that has significant revenues from other securitisations and investments. However, since regulation does not specify clearly how to measure the revenues attributable to the retained risk, it becomes challenging to assess their relative significance.

In the absence of clarity, the bank supervisor — ie the European Central Bank — has adopted an overly restrictive interpretation of the existing rules which departs from market practices and from the rules prevailing in the US and the UK. Under this interpretation, securitisation is too costly for European banks, in terms of capital requirement.

This creates a paradox: while on the one hand the ECB publicly declares its commitment to developing Europe’s capital markets, on the other it stifles their growth through a narrow reading of the rules. This produces two main consequences. The first is that European banks cannot expand their lending to meet the demand of European corporates, especially the SMEs. The second is that non-European financial institutions, especially US private debt funds that are not regulated in Europe, are given a competitive advantage in the nascent European market.

The overall result produced by unclear rules and their overly bureaucratic application is that companies are left without sufficient financing, while the replacement of European banks by foreign competitors encourages unregulated non-bank entities to directly enter this segment of the credit market. In other words, less credit for the real economy and more unmonitored risk in the system. A true masterpiece of unintended consequences.

What is really needed, in order to develop a unified financial market that truly supports the European economy, is not so much a simplification of the existing regulatory framework but rather its clarification, so that the rules can be applied consistently and with little discretion, making life easier for supervisors, financial intermediaries and companies.