EU telecoms ROCE vs WACC: aggregate strength but wide dispersion
Aggregate EU group-level ROCE posts are above or at the WACC, but operator-level results show broad dispersion.
EU-wide analysis covers 14 large integrated operators and spans 2014 to 2024. On an aggregate post-tax basis, ROCE including and excluding goodwill was generally at or above the group WACC, with notable exceptions in 2014-2015 and 2020-2021 for ROCE with goodwill, and in 2021 for ROCE excluding goodwill. The 2024 and 2023 readings suggest renewed strength as heavy investment in fibre and 5G assets comes through. The study also highlights that country-level outcomes vary widely even as the sector maintains a historically high dividend payout ratio relative to other European industries.
But averages mask material heterogeneity. A sizeable number of firms consistently earn ROCE above WACC, while others trail the cost of capital. The analysis stresses the dangers of over-interpreting sectoral averages without acknowledging firm- and country-specific dynamics. In-country country-level operations across seven of the 14 groups show nine to eleven units per group, with some operators active across multiple EU jurisdictions. The data point to a continuing period of investment recovery and improved returns that could sustain CAPEX-driven growth into the mid-2020s.
The dividend story remains salient. European telecoms have long ranked among Europe’s higher payout sectors, balancing the leverage typical of capital-intensive network operators with ongoing distribution to shareholders. This dynamic implies that investor risk and policy calibration around leverage and capital allocation remain central to understanding future returns. The authors caution that while the long-run trend looks constructive, a wide dispersion of outcomes across operators means policy-makers and investors should not rely on sector-wide narratives alone.
In summary, the EU telecom sector appears to have earned positive returns on average over the past decade, with high dividend support and a tightening risk-return profile as CAPEX cycles mature. However, the heterogeneity in ROCE-WACC gaps at the firm and country levels warrants careful screening of individual operator strategies, asset mix, and regional regulatory regimes. The piece notes that the results are preliminary and should be interpreted within a broader financial- and competition-policy context.
The US dollar is not a traditional safe-haven currency
CEPR analysis finds the dollar behaves as a funding currency with persistent effects only under global funding stress.
New evidence challenges the conventional view of the US dollar as a standard safe haven. The authors construct a funding-stress factor and a safe-haven factor to distinguish currency responses to different risk regimes. A one-standard-deviation safe-haven shock tends to strengthen the dollar immediately by a few basis points, but the gain dissipates within days, while it strengthens against traditional safe-haven currencies like the yen and the Swiss franc over longer horizons.
By contrast, a one-standard-deviation funding-stress shock triggers a persistent and broad dollar appreciation, with a notable widening in CIP deviations for the dollar and a broad-based credit-tightening signal. The findings suggest that the dollar’s resilience is most pronounced when global funding conditions tighten, rather than during ordinary risk-off episodes. The study underscores that the dollar's status as the world’s funding currency may have grown more pronounced in recent years, even as its safe-haven credentials wane.
The analysis relies on daily data since 2007, drawing on a mix of CIP deviations, OIS spreads, and currency composites. It contrasts the dollar’s reaction with that of established safe-haven currencies, where the yen and Swiss franc exhibit more persistent strength during risk-off, outside periods of funding stress. The authors note that the dollar’s overall safe-haven role may be diminishing in some episodes, raising questions about hedging and policy considerations for central banks and multinational firms.
Going forward, the authors advise monitoring the interaction of safe-haven and funding-stress signals, especially in periods of rising global liquidity constraints. Traders and policymakers should repay attention to CIP deviations and cross-currency dynamics against the yen and the franc, which may reveal shifts in the safe-haven calculus. The piece closes by suggesting that the dollar’s traditional safe-haven status could be fading, albeit in a context where its role as global funding currency remains intact during stress episodes.
JP Morgan strategist: 2026 is not a time to get greedy
Hugh Gimber cautions against aggressive risk-taking in 2026 while urging quality and regional diversification.
Gimber argues that growth remains broadly healthy, but stock valuations are expensive and earnings risk is mounting. He advocates a bias toward quality and a diversified regional stance, emphasising Germany’s planned fiscal expansion to around 12 per cent of GDP over the next decade as a potential growth lever. The commentary implies that investors should prioritise resilient balance sheets, budgetary clarity, and exposure to regions with improving earnings visibility.
The strategist warns that earnings revisions could deteriorate in late 2025 into 2026, threatening multiple expansion for many equities. He points to diverging European trajectories, particularly the European periphery versus stronger core economies, as a meaningful risk for global equity allocation. The message is clear: maintain a cautious stance and avoid over-concentration in high-valuation growth assets, especially where regional growth dynamics diverge.
Investors should monitor earnings revisions and the evolving regional outlook through 2025 and 2026. The piece points to the MSCI World Quality index as a potential benchmark to observe relative performance against a broader market. The caution aligns with a broader view that high starting valuations can compress in the face of rising earnings volatility and macro shifts. The note is a signal to balance risk and quality, with a readiness to reallocate as conditions evolve.
Market players will be watching how Germany and Southern Europe diverge in the coming months, alongside global quality versus growth performance differentials. The discussion sits within a broader narrative about valuation discipline and regional diversification, suggesting that 2026 could test investors’ willingness to pay a premium for certainty and durable cash flows. The warning is not about avoiding equities, but about tilting toward safer franchises and more resilient geographies.
Europes Wind Bet Meets a Cold, Hard Energy Lesson
Nine European countries pursue 100 GW offshore wind, while the US grid demonstrates reliability challenges in winter demand.
Europe plans to add 100 GW of offshore wind capacity to curb imports and localise generation, a move framed against a winter energy backdrop where US machinery relies on oil for baseload in parts of New England and other regions. The energy mix picture is complicated by Russia’s gas ban due to take effect in January 2027, and a heavy role for US LNG in EU and UK imports. The Reuters-like briefing underscores the need for baseload capacity and diversified fuels to complement wind expansion, highlighting both opportunities and energy-security risks.
The energy balance in Europe appears to hinge on a mix of expanding wind capacity and ensuring reliable fuel supply chains. The plan comes amid heightened attention to storage, grid resilience, and the adherence to climate targets while ensuring affordability and reliability for consumers. The analysis notes that the wind buildout, though ambitious, will depend on interconnection, planning approvals, and the ability to secure long-term fuel contracts or storage solutions.
Important watchpoints include progress on the 100 GW offshore wind pipeline, the evolution of LNG import mix, and the rate at which Russian gas can be substituted with alternative supplies. The piece flags the potential need for greater baseload capacity to stabilise grids as variability of wind output persists. Observers will also assess how US LNG sourcing and global gas markets respond to Europe’s accelerated wind agenda.
The broader takeaway is that Europe’s wind expansion, while structurally transformative, cannot by itself guarantee reliability or price stability. Without a diversified energy mix and robust storage, energy security risks persist even as carbon-intensity declines. The story cautions policymakers to plan for the systemic integration of large-scale renewables with reliable fuels and flexible demand management.
Venezuela Signals a Historic Energy Reset as Oil Laws Open to Foreign Capital
Reforms open upstream to mixed enterprises and private players, with new tax and contract terms under consideration.
Venezuela’s interim government is pursuing upstream reform that could broaden participation beyond state control. The proposed framework would permit mixed enterprises and private Venezuelan-domiciled operators to work on contracted projects, subject to project-specific contracts. A 30 per cent royalty cap and a new Integrated Hydrocarbons Tax of up to 15 per cent are among the fiscal features being debated, with minority partners allowed to market their production shares. The reforms aim to attract external capital and modernise the sector.
Sanctions policy and governance risk remain pivotal. Investors will closely watch whether sanctions relief advances in parallel with legislative reform, and whether property rights, contract enforcement, and currency stability can be relied upon in a high-risk environment. The reforms would offer a more flexible operating framework and renegotiate financial blocks that have long constrained oil investment, but the macro-political backdrop remains a critical constraint. The changes could, if realised, reset the economics of large upstream projects.
Analysts caution that even if the draft legislation passes, the practicalities of financing Venezuelan oil ventures will hinge on how sanctions policy evolves and whether international lenders perceive credible risk mitigation. The reforms signal a possible pivot from rigid state-led models toward hybrid arrangements that could attract private capital, subject to the political economy of the region and the regulatory environment. The balance between revenue capture and investment incentives will be central to any decision to participate.
Market observers will track the National Assembly’s reform agenda, sanctions-relief developments, and contracting terms for new projects. The policy pathway remains uncertain, with potential for meaningful capital inflows if the risk premium is adequately priced and governance commitments are credible. The coming weeks and months will reveal whether Venezuela can convert policy announcements into tangible project finance and accelerated upstream development.
Data Centers Are Driving a US Gas Boom
AI infrastructure is lifting US gas-fired power, with projected fleet growth tied to data-centre demand.
Data-centre expansion is reshaping US gas demand; Global Energy Monitor notes that building all planned gas-fired capacity could increase the US gas fleet by nearly half, with data-centre load accounting for more than a third of new demand. The implication is that gas infrastructure may remain a structural pillar in a grid transitioning toward higher renewables, unless demand curves shift or policy reshapes incentives. This signal suggests a persistent driver for US gas prices and for capital allocation in gas generation.
The narrative presents a paradox: growing data-centre energy needs defend gas assets against a renewables-only narrative, while policy and climate targets continue to push decarbonisation. The investment implications touch on capacity planning, pipeline investments, and the economics of siting new gas-fired plants in a grid with increasing intermittent supply. Observers will seek updated capacity plans and project-level details for the next 12 to 18 months.
The story also intersects with broader energy-security questions, including how the electricity system balances reliability with emissions targets. If data-centre demand remains robust, gas-based capacity could remain economically viable for longer than some observers expect. However, policy shifts toward carbon pricing or clean-energy incentives could alter the margin dynamics quickly. The sector will need to monitor both infrastructure development and regulatory signals to assess medium-term profitability.
For energy-market participants, watch indicators include announcements of new gas-fired-buildouts, capacity-utilisation data, and the pace of demand growth from AI-related data-centre deployment. The interdependencies between cloud platforms, data-centre operators, and gas suppliers will shape pricing and investment strategies in the near term. The development underscores the continuing centrality of gas in a high-renewables era.
One of the world's largest solar projects headed for California's Central Valley
A 21 GW solar farm is planned for California’s Central Valley, a world-scale initiative with land-use and water implications.
The project, described by industry observers as world-scale, would be among the largest solar deployments in the region, with land-use planning and interconnection processes underway. Supporters argue that the project would bolster local generation, support climate goals, and create jobs, while critics flag potential conflicts over water resources, land use, and ecological impacts. The timeline includes regulatory reviews, permitting, and interconnection arrangements that could extend into the later stages of the decade.
Intermittency and storage needs remain central to debates about the project’s practicality. If the project proceeds, it would necessitate substantial grid reinforcements and storage capacity to deliver reliable baseload-like performance. The regional context also involves water availability and land-use pressures, which could influence the speed and cost of development. Stakeholders will watch permitting decisions, interconnection approvals, and financing milestones as the project progresses.
The California Central Valley sits at the intersection of climate policy ambitions and rural land-use realities. Supporters emphasise the economic and environmental benefits of expanded solar generation, while opponents raise concerns about agricultural land, water resources, and local environmental effects. The outcome will hinge on how planners resolve competing land-use interests and how the project accommodates grid integration. Analysts expect further updates on regulatory timelines and potential partnerships with storage and transmission developers.
Observers are looking for closer reporting on interconnection queues, environmental impact assessments, and the financial structuring of such a large solar venture. The project’s fate will illuminate broader trends in utility-scale solar deployment in the United States, particularly in regions characterised by high solar potential but competing land-use demands. If successful, the Central Valley plan could become a benchmark for similar scale solar developments in other western states.
Data notes and editorial disclosures
The preceding items reflect a synthesis of WEB sources dated within 2026, drawn from CEPR perspectives on EU telecoms, market dynamics discussions on the US dollar, JP Morgan Asset Management commentary, and sector-specific energy reporting. Where applicable, statements are attributed to their original sources and contextualised within the framework of ongoing policy, market, and technology transitions.