Middle East tensions flare up, again

00:00:00: The selloff in technology stocks continue.

00:00:02: The latter is encouraging some rotation toward the non-technology pockets of market, but the re-escalation threatening to reverse the recent easing in inflation and enhance central bank expectations.

00:00:24: With geopolitical respect in focus, we could see volatility rise on headlines coming hours and days.

00:00:30: So welcome to Swiss Coats.

00:00:32: Daily Market Talk is Wednesday, eighth of July.

00:00:35: I'm Ipe Gosgar Deschkeya.

00:00:37: We will talk about space and earth economics But before that as always please keep in mind that opinions are my own And this isn't financial advice.

00:00:53: This show is brought to you by SwissQuote.

00:00:55: So let's head off.

00:00:56: that started after some song announced jaw-droppingly good and more importantly better than expected results.

00:01:03: Continued in the following European and US sessions.

00:01:06: yesterday, ASML in Europe for example lost more then seven percent in yesterday's trading session while Van asked my Conductor.

00:01:15: ETF in the U.S.

00:01:16: fell nearly three point eighty percent slipping below its fifty day moving average for very first time since April this year.

00:01:24: to technology heavy Nasdaq hundred index led losses among major u.s.

00:01:29: indices it and close a touch below its own.

00:01:53: Now note that yesterday was also the end of The Quiet Period for SpaceX.

00:01:57: Wall Street analysts started revealing what they thought about the company and where it's headed, And its blew my mind to see how the views went from bullish to extremely!

00:02:31: That would be a hundred percent increase compared to yesterday's closing price.

00:02:36: say that they believe SpaceX can convert energy into intelligence at scale with optionality to monetize through a range of consumer and enterprise solutions for the next era of AI, while also saying there is still considerable uncertainty about companies prospects.

00:02:57: And this part is more interesting than their average price target in my opinion.

00:03:01: Morgan Stanley analysts actually see SpaceX's price range from seven to five dollar per share, two six hundred dollars per share.

00:03:10: It's quite a gap!

00:03:11: I think that if SpaceX can pull off the orbital data center business it would indeed mark a turning point regarding their AI infrastructures future.

00:03:21: But on the other hand, The company must spend loads to get their data centers into orbit and it seems like cash that they will burn is not being taken seriously in account when setting price targets.

00:03:34: I'm not saying It's hard task for a company that promises a revolutionary business But the bad part is that this business doesn't exist just yet.

00:03:46: It's overly ambitious, it will be overly costly and SpaceX existing and money making businesses like Starling for example and data centers having so far not been able to finance their costs now selling computing power too.

00:04:01: compute hungry AI companies could reduce that gap but we don't know.

00:04:05: So We are watching SpaceX all watching.

00:04:08: Meanwhile on planet earth things are souring again, tensions in the Middle East have increased a notch this week after Iran attacked ships and the Strait of Hormuz.

00:04:19: remember to which?

00:04:24: What a peaceful peace negotiation, period.

00:04:27: If I understood well Iran is now reportedly laying mines through the Strait of Hormuz which would obviously force ships to pay for their security because only Iran knows where the mines are.

00:04:38: and even after the peace deal is inked Yes that will be terrible long-lasting consequence Of an unnecessary war That brought strictly nothing To anyone except for Israel's very own geopolitical and political interest.

00:04:51: Now this is not a geopolitical or podcast so I won't comment on the geopolitical dimensions of this extremely complex story but i can say that peace talks are looking to be in jeopardy today if you add it into the mix, nuclear ambitions from both sides that do not meet each other.

00:05:09: The US is asking Iran to scrap its nuclear program while Iran has seen no interest whatsoever after being sold wildly attacked by U.S and Israel duo!

00:05:22: So U.S.

00:05:23: crude rallied more than five percent in yesterday's trading session on these renewed Middle East concerns and it is consolidating gains above the seventy two dollar per barrel level this morning at future prices.

00:05:45: This is the normal state of oil market, mind you because Oil has storage costs.

00:05:50: so if you buy oil today You have to store it somewhere and its cost money.

00:05:54: Therefore, if you buy oil today rather than buying it tomorrow You would want to pay cheaper price for it.

00:06:00: This is the normal market structure But this market structure flips in times of stress and scarcity.

00:06:06: In a latter situation buyers prefer buying oil immediately Today Scared that there will not be enough Oil in the future or It could just cost more in the Future Resulting in spot price exceeding future prices.

00:06:18: This exactly what happened during Iran war weeks The further maturity the price compared to this spot price.

00:06:26: Again, the market turned contango by mid-June and could stay there if Middle East tensions do not escalate further enough that stress in oil markets remain contained.

00:06:37: as per Oil Prices – The US dollar per barrel level for the U.S.

00:06:41: crude which is a two hundred day moving average looks to be next critical resistance In case of re-de-escalation of the Middle East Tensions though it's unclear how long oil prices can go from here.

00:06:52: The pullback was supported by the supply side of this story, yet there is another side to this equation which is demand.

00:06:59: More specifically what will China do?

00:07:02: Because China cut its demands very sharply during the Iran War as prices went up and according to financial times it just started tapping back into international markets to replenish oil reserves when prices fall.

00:07:15: The good news is that China looks have enough reserve so if prices rise again they could stop.

00:07:21: Buying.

00:07:21: But the bad news is, if oil prices rise again on geopolitical uncertainties The recent softening and inflation expectations would rapidly reverse And force global investors to return To their hawkish central bank expectations.

00:07:35: That's not good news for a global market appetite Because that global yields rose sharply in yesterdays trading session.

00:07:42: Along with rallying oil prices A benchmark of the European ten-year yield spike Passed at three percent level.

00:07:50: two-year yield which best captures the Fed's expectations, flirts with a four point twenty percent level again this morning as Japanese ten year yield advances to an eighty seven percent level.

00:08:01: Which is fresh multi decade high!

00:08:03: As such equity indices are about come under renewed pressure.

00:08:07: if the tensions in the Middle East just don't disappear Quickly increasing the risk of a pullback from fresh all-time high levels for some of these indices at a time, technology investors also walk on tightrope.

00:08:21: So today investor's attention will be shifting to the latest Federal Reserve Minutes but given how fast their headlines changed there I think that whatever has been said in this meeting is already outdated.

00:08:32: Remember rising US inflation was a focal point.

00:08:37: the US cleared nearly half from its wall peak of one hundred and twenty dollars per barrel level to below seventy dollar per barrel levels this month also easing inflation expectations.

00:08:50: And today, The peace deal between the U.S & Iran is in jeopardy again and oil prices are rising again filling inflation expectations.

00:08:58: as such geopolitical headlines will likely determine market sentiment over coming hours and days a further deterioration equity valuations along with the rising stress in technology.

00:09:18: down by more than twenty percent since June peak and stepping into the bear market.

00:09:23: So this is all for today, I'm Ipeko Skardishkerja And thank you for joining me!

00:09:28: Thank you to all your beautiful and supportive comments!

00:09:32: This episode of Market Talk has been helpful and it's been insightful so please do not hesitate to leave your comments, reactions or questions below.

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00:10:02: So I will meet again tomorrow and until then good day trading.

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