Strong US Jobs, rising oil weigh on sentiment; tech spared… for now

00:00:00: Hi and welcome to Swisscodes daily market talk.

00:00:03: It's Monday, seventh of September.

00:00:05: strong US jobs date on Friday rising oil prices this morning on Middle East tensions and mounting inflation risk are boosting the Fed rate hike bets today and pushing Treasury yields higher since friday while technology stocks proved surprisingly resilient Today.

00:00:22: latest news on the macroeconomic front rather supported by renewed AI enthusiasm following open AIs latest model lounge.

00:00:30: So this week, global bond yields will still remain in focus as the US Treasury is preparing its bigger buybacks as soon.

00:01:02: This show is brought to you by SwissQuote.

00:01:04: So this week starts on an uncomfortable but quite a mixed note.

00:01:08: escalating Middle East tensions, news of mutual ship attacks between the US and Iran in the Strait of Hormuz keep energy prices under a positive pressure this morning with U.S.

00:01:18: crude consolidating near the ninety-three dollar per barrel level.

00:01:22: Brand's crude on the other hand pushes past the ninety seven dollars per barrel.

00:01:27: The letter comes on top of an unexpected these strong jobs numbers from the US Friday because Friday's data showed that, the U.S economy added one hundred and sixty two thousand new non-farm jobs in August.

00:01:40: last month's three thousand job losses was revised to a twenty one thousand job gains.

00:01:46: ,the wages grew faster than penciled by analysts why the participation rate also rose.

00:01:51: So all the numbers came to support the idea that the Federal Reserve could go ahead and raise their interest rates as soon as in September, if of course the inflation side doesn't show signs of easing.

00:02:05: At some point on Friday, the US two-year yield which best captures the Fed rate expectations spiked four point forty two percent mark.

00:02:13: That was the highest level since January, twenty five or the highest levels since Donald Trump returned to The White House if you will.

00:02:20: Funnily enough US President and Vice-President call for rate cuts in the U S which is not a good idea of course as we all know it because lower interest rates are supposed to boost economic activity and leather tends feel inflation has something that clearly don't want at central banker when your inflation running above target persistently for more than half a decade.

00:02:43: Kevin Warsh's All Words.

00:02:44: So all eyes are on the latest US inflation update that's due later this week, due Friday.

00:02:50: The U.S.

00:02:50: Core CPI data could print a slight easing to two point four percent year over a year from twenty-half percent printed a month earlier.

00:03:00: This figure excludes volatile food and energy prices mind you To see through the dust when you do longer term monetary policy.

00:03:08: But it will not change the fact that the energy prices on Middle East and Ukraine wars, extreme weather impacts crops hence food prices.

00:03:16: And exploding electronic component costs are adding fuel to the fire.

00:03:20: Activity on Fed funds futures now assesses nearly a sixty percent transfer at twenty-five basis point hike from the Fed in September.

00:03:28: The more important question is whether Kevin Walsh could dare raising interest rates before midterm elections despite very strong pressure and pushback and his latest report that the political pressure to contain borrowing costs is more likely to apply in the US by decreasing the borrowing cost for households and companies.

00:04:15: So far though, the US-thirty year yield retraced more than half of the retreat following U.S.

00:04:20: Treasury's announcement that it would be buying bigger amounts especially for longer term papers.

00:04:27: The thing is if market doesn't play along I am afraid that Besson will keep putting more firepower on table until something works in short run but long run its less obvious because the biggest investors are now pulling back.

00:04:43: Norway's sovereign wealth fund, for example is now willing to reduce the size of his sovereign bond allocation from seventy-to fifty percent to invest in rescue assets and reshuffle its exposure.

00:04:54: That could eventually see US Treasury holdings fall by around seventy five eighty billion U.S.

00:04:59: dollars while JGB so it's Japanese Bond Holdings could increase U.S dollars.

00:05:07: and Japan has a similar story.

00:05:08: brewing the Japanese government Has been encouraging the giant one point eight trillion worth Government pension investment fund in japan to invest more domestically now that The japanese deals have risen enough To become interesting and attractive, And this fund has nine hundred thirty billion u.s dollars In foreign assets including more than two hundred Thirty billion us dollars in US surgeries That will be partly eventually repatriated back pulling the rep from under US Treasuries.

00:05:37: In short, Besson is not only fighting inflation expectations and spiraling U.S.

00:05:41: debt that's speaking investors but also fighting an external battle to keep Japanese yields contained and eventually hope limit this spill over into the US borrowing costs.

00:05:52: Time will show whether Bessons would be successful in manipulating market or not.

00:05:56: Now in markets for Friday strong jobs data push shields higher on most stock valuations to Dow Jones retreated point fifty percent.

00:06:04: this MP five hundred fell point thirty eight percent.

00:06:08: While the technology-heavy NASDAQ hundred EEC out is small, point twenty one percent gain on Friday.

00:06:14: Helped by a rallying chip makers on renewed AI enthusiasm after OpenAI unveiled its GPT six astro model, it's most advanced model yet trained in more than hundreds thousand GPUs and described as potential milestone toward AGI.

00:06:30: Unsurprisingly Asian tech heavy indices are following US technologies peers higher this Monday morning with knee soft bang.

00:06:38: One of the biggest backers off open AI is up by ten percent at the time I'm talking here, following a nearly twelve-percent jump on Friday.

00:06:46: MediaTek, it's Taiwanese chip designer that also pushing increasingly into

00:06:50: A.I.,

00:06:51: is up eight and half per cent while Korean Cosby Index heavy in memory chip makers are nearly out four per cent this morning boosted by rallying Samsung and SK Heinecks over in China.

00:07:02: The news of huge capital injection from Chinese government into its banks and insurers is also pushing capital in to China's technology sector today.

00:07:12: The Star Index, including China's fifty biggest technology names are rebounding one point fifty percent this Monday morning.

00:07:20: at the time I'm talking here indexes just near as two hundred day moving average on a major thirty eight point two per cent retracement on September twenty four till July twenty six rally.

00:07:31: other news will help attracting more capital for Chinese mainland markets remain to be seen but China is putting all its weight behind it's capital markets to attract more capital especially in this technology sector.

00:07:43: Now, this week Oracle and Adobe will be releasing their latest quarterly earnings and it's going to be interesting because Oracle sits on the infrastructure provider side of AI story while Adobe sits on software side.

00:07:55: overall the latest earning season show that AI spending remains strong yes but investors are becoming increasingly demanding about turns on that investment, knowing it is now becoming more and more leveraged.

00:08:10: Therefore these companies' results should give us a good sense of whether the AI boom continues to translate into stronger demand but more importantly further it will translate in strong revenues.

00:08:24: Adobe, on the other hand will offer a useful test of whether Generative AI is becoming a meaningful revenue driver for these software companies rather than simply a costly future to develop or worse.

00:08:37: A competitive threat that would destroy their business.

00:08:39: but note that iShare's expanded technology software sector had recovered most office September till April slumped.

00:08:46: That was triggered by fears at AI which pushed this software company out of business very quickly, but now investors seem to realize that AI will first help them boost their revenues before eventually pushing out of business.

00:09:03: On the macro front, The European Central Bank is expected to raise its interest rates by twenty-five basis points this week as inflation remains uncomfortably high for a European policymaker.

00:09:13: so we'll talk about all But this is all for this Monday.

00:09:18: I'm Yipega Skardeshkaya and thank you for joining me, And Thank You For All Your Beautiful And Supportive Comments!

00:09:24: I hope This Episode Of Market Talk Has Been Helpful And It Has Been Insightful To You.

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