Rising oil weighs on sentiment into US CPI data

00:00:00: Hi and welcome to Swiss Codes.

00:00:02: Daily... market talk.

00:00:03: It's Tuesday, the eleventh of August and rising oil prices are again fueling inflation worries around uncertainty.

00:00:32: And well, with the Fed's guidance increasingly opaque what investors will have to do the heavy lifting in their coming months and quarters?

00:00:41: so we'll talk about all that too complex global macroeconomic situation and impacts on cross market prices.

00:00:48: but before So risk appetite is weakening globally along with rising oil prices that fuel global inflation expectations and push yields higher.

00:01:11: U.S.

00:01:11: trade today is consolidating near the US dollar per barrel level after a more than six percent surge.

00:01:17: on Monday's trading session, on the back of little progress in US-Iran peace negotiations Trump reportedly made new demands from Iran quite crazy demands including compensation for people killed promising to me for an immediate peace deal.

00:01:35: As such, risks remain tilted both ways price-wise as investors continue to react strongly to Donald Trump's peace hopes.

00:01:41: but concretely speaking Washington's peace promises have been unfounded since the beginning of this war and there is no guarantee whatsoever that the current diplomacy will later any kind of lasting peace in Iran!

00:01:56: As such spot prices and oil are rising faster today than the futures prices Tinting that investors are back to trading the worries of tighter short-term oil supply due a prolonged closure off the Strait of Hormuz when traffic across the Red Sea is also being threatened by healthy attacks.

00:02:13: On the other hand, a credible reopening after Strait Of Hormuzz or a peace deal and all further promises from Washington that investors would believe could knock a lot of premium out off the front and very quickly.

00:02:26: This is why short term risks are tilted both ways.

00:02:29: in the longer run I expect oil prices to come back to pre-war levels when war ends, obviously.

00:02:35: But today uncertainty in the Middle East The rebound on oil prices leading to a rebound in global yields again Is waiting on global indices near their record high level still.

00:02:46: So this situation's not alarming but US and European indices look like they're going take a breather before for tomorrow's US CPI data as yesterdays was not necessarily great.

00:02:57: Look, NVIDIA's fresh five hundred billion USD funding package from WallStreet Careways reignited worries about the circular deals in AI somehow outweighing also that forty-five percent sales surged at TSMC announced biggest customers.

00:03:23: Now we don't know yet if yesterday's five hundred billion US dollar funding announcement is part of that deal, but the fact that NVIDIA securing fresh funding and a huge funding to invest in its own clients so they could continue buying these expensive AI from them means that their money is still turning round and around among a handful in.

00:03:52: one of these companies is in the line.

00:03:54: That's exactly why Nvidia saw its price pledge to point eighty six percent yesterday on the news and broadly speaking, a broader benchmark for chip makers fell more than two percent in the West yesterday.

00:04:06: But the membership maker Heavy Cosby Index is up again this morning on news that Samsung considers as massive shareholder return package.

00:04:14: but the dip buyers may remain tipped despite the news following a sharp correction that took place between June & July at the Cosby index hurting a lot of retail investors who thought it would never end.

00:04:28: or you memory chipmakers, well past year's chipmania could well be over.

00:04:33: I'm sorry Even though the Korean chip makers will continue to benefit from a massive AI build-out and that's two Korean chip giants, Samsung and SK Heineck.

00:04:43: These companies today have forward P ratios falling around five times.

00:04:48: so prices are great but chip valuations don't guarantee immediate return of speculative long positions which made these traditionally boring stocks the hottest commodities for months into their latest sell off.

00:05:01: I think on the contrary the downside correction is more likely to be on the menu today.

00:05:07: A fair-to-be fellow!

00:05:08: Now moving onto macroeconomic picture, The Reserve Bank of Australia maintain its rates unchanged as widely expected pointing at rising unemployment in Australia and weakening property.

00:05:20: prices.

00:05:20: So the Aussie dollar reacted to the news by easing below its hundred day moving average, while the US dollar index is consolidating it's recent weakness near his own hundred-day moving average.

00:05:32: right now into the U.S.

00:05:33: CPI data released tomorrow.

00:05:35: The rebound in oil prices and yields are clearly supported for a stronger US dollar in the shorter run While the waning confidence in Fed intention real intention To bring inflation down toward two percent policy target sell the America trade back to the table and that is actually clouding.

00:05:54: The long-term outlook for U.S.

00:05:56: dollar making it weaker, especially visible in goals rise along with oil and US yields these days.

00:06:03: The price of an ounce shot about a forty four hundred dollars per ounce level yesterday.

00:06:08: now we're well below the fifty six hundred dollar mark reach at January peak.

00:06:12: but longer term fundamentals remain supportive for the yellow metal because we have these geopolitical uncertainties, trade uncertainties US uncertainties exploding DM debt levels and weakened appetite for U.S.

00:06:25: dollar and u.s treasures all together due to All this happenings around the us.

00:06:29: note also that the inability To contain the yens weakness against us dollars is a risk for us treasury yields.

00:06:36: That's The reason why us Is so involved in trying to stop the ends depreciation past the one hundred sixty level.

00:06:42: Because Japan is One of the world's largest largest US Treasury holders, the weakening yen could eventually force a Japanese institution to sell their treasury holdings and compensate for it.

00:06:54: And the latter COULD in theory apply additional pressure on U.S.

00:06:58: yields something that doesn't want to happen especially not now.

00:07:02: as such The Dollar Yens approaching the hundred-and-sixty level again following short lived interventionally philosophy is NOT necessarily good news either for global macroeconomic picture.

00:07:14: So today, the cautious market feeling will likely remain in play as investors will likely remained on the sidelines before tomorrow's most closely monitored US CPI data.

00:07:25: Now it is a sure thing that last Friday soft us jobs report soften the hawkish fed bets.

00:07:29: but there is now this growing worry for global macro investors Today The one that points at the possibility That the new Fed check Kevin Walsh Will indeed become a suck puppet to the White House and that his first weeks in office This was just a temporary show of independence.

00:07:47: from the big boss in The White House.

00:07:49: Because as we move forward, We see that wash is seemingly on its way to make Federal Reserve an obscure room where economic monetary policies will be mixed and matched with The White house's own political and geopolitical ambitions.

00:08:03: And thats a piece of news that also largely explains the returning appetite for gold in expense of US dollar and US treasury these days.

00:08:11: But even though Wash becomes more elusive regarding the Federal reserve reaction function in the face of rising inflation.

00:08:20: I believe he is still smart enough to know that losing the Fed's credibility and market support would make his monetary policy decisions less effective, actually totally meaningless.

00:08:35: That's why US data matters more as it gets opaque, and the market will have to do heavy lifting in absence of clear Federal Reserve guidance.

00:08:43: The reasoning is always the same – stronger than expected inflation would push yields higher on risk appetite while benign inflation numbers from U.S could soften the hawkish Federal Reserve bets without however fully taming them as oil prices continue to surge.

00:09:00: And it's important to note that at the end of today, the markets so we all together not the Fed will be deciding where the borrowing cost should be.

00:09:10: Those wondering what happens when the Fed or other central banks resists adjusting policy ways in line with economic fundamentals like inflation and unemployment?

00:09:20: To please the politicians around the world who simply want lower interest rates because politically.

00:09:26: this is what's best for them, well must have a look at Japan and Turkey to understand how poorly managed monetary policies can pressure currencies in the longer run.

00:09:36: And ultimately sicken economies!

00:09:38: So that's all today.

00:09:39: I'm Ifeke Oskar Deshfea.

00:09:41: Thank you so much for joining me.

00:09:42: thank you for your beautiful support of commands.

00:09:46: This episode of Market Talk has been helpful and it's been insightful to you, so please do not hesitate to leave your comments, reactions or questions below as usual.

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00:10:18: And until then, good day

00:10:35: trading!