Brent near $100pb weighs on sentiment

00:00:00: Brandscrewed is nearing the hundred dollar per barrel mark since yesterday as escalating Middle East tensions and supply disruptions fuel energy market worries.

00:00:09: Higher energy prices then keep inflation concerns well alive around the globe, pushing bond yields higher and weighing on equity appetite.

00:00:17: Technology stocks have performed so far this week supported by fresh AI developments and partnerships but rising borrowing costs massive AI spending and increasingly leveraged balance sheets remain key.

00:00:29: risk putting Oracle's upcoming earnings this Thursday firmly in the spotlight.

00:00:33: So welcome to Swisscoats daily market talk, it's ninth of September.

00:00:38: I'm Ipeko Skardeshkaya.

00:00:40: we will talk about how rising energy prices impact global asset prices and more.

00:00:45: but before we do an as always please keep in mind that opinions are my own And This is not financial advice.

00:00:57: This show Is brought To you by swiss quote.

00:00:59: risk appetite remains weak As rising oil prices occupy The headlines and investors' minds as well.

00:01:05: U.S.

00:01:06: crude is consolidating near the ninety-five dollar per barrel level this morning, at a time I'm talking here while brand crude is a few cents below one hundred dollars per barrel psychological level.

00:01:18: on news that US targets near Iran's Kharg island.

00:01:22: yesterday several Saudi energy facilities also halted their operations due to.

00:01:27: Now, these latest news fills short-term supply worries obviously and we can see that across oil futures because spot prices are again rising faster than the futures price as buyers want their oil today rather then risking tomorrow.

00:01:43: We continue to be in a classic supply-shortage pricing environment, hence short term risk remain tilted to the upside across energy markets.

00:01:51: But why now?

00:01:52: Oh because someone was full of hope that peace agreement between US and Iran could be achieved.

00:01:56: as optimism is fading As we enter September Go figure Why.

00:02:00: from a diplomatic perspective it's very hard obviously To keep that optimism running.

00:02:05: Then two, there are worries today regarding the world oil reserves that have been diving since Iran war started.

00:02:12: That was one of reasons why we haven't seen energy prices spike above the US dollar per barrel level.

00:02:19: but lower reserves mean lower cushion for prolonged wars making a future supply shop more difficult to smoothen out.

00:02:26: And third, one is probably the most important factor.

00:02:29: China's oil imports rose in the month of August although they remain well below pre-wall levels.

00:02:35: Now part of the increase may reflect stronger refined product exports which are good for refined products prices internationally.

00:02:43: But note that China may also need to replenish its inventories after drawing honest reserves over the past six months.

00:02:49: And that matters because weak Chinese oil purchases over these last six months have been one of major factors limiting upside pressure in global energy prices.

00:03:00: The risk is that the Chinese demand now picks up more meaningfully, it could add another layer of pressure to an already tight oil market.

00:03:08: so that means if China starts buying again and traffic in the strait of Hormuz is not restored while we can see price of crude return and potentially surpassed early Iran war peaks meaning around one hundred twenty dollars per barrel level We will see how the demand side would impact our equation.

00:03:27: because remember At some point above a certain price, we start seeing demand destruction.

00:03:33: That means that oil becomes just too expensive and starts destroying.

00:03:37: the man on the ladder keeps upside limited Now elsewhere, European TTF futures also rallied yesterday.

00:03:43: Another four percent before closing flat happily.

00:03:46: but gas prices here surged up to one hundred eighty per cent so far this year.

00:03:50: they are still notably lower than the levels reached during early weeks and months of the equino war.

00:03:56: But here as well The risk remains tilted to the upside And we do have potential To see these prices rise.

00:04:02: One hope is that Europe may Have a mild winter!

00:04:05: That's basically it only hope We have in Europe Is that any progress toward peace or a hint of peace from officials could rapidly reverse the situation, making long oil and gas positions extremely vulnerable to price swings?

00:04:19: But what's certain is that refined product prices don't come down immediately when creating gas spot and future prices do because refining margins inventories and supply constraints can keep gasoline at diesel.

00:04:33: prices elevated and that is exactly what matters for inflation.

00:04:36: so that per se, it's pointing at nearly certain rise in global inflation levels in the coming months.

00:04:43: And that will lead to some rate hikes incoming days and weeks.

00:04:46: unfortunately because look US gasoline prices rose yesterday to the highest level since July and diesel prices hit a record high-level last week remember?

00:04:55: As such The U.S.

00:04:56: two year yield our best captures of federal reserve rate expectations spend first trading day after holiday important week in the West.

00:05:04: pushing higher.

00:05:05: European yields also pushed higher yesterday with the German ten-year yield hitting a fresh high since two thousand and eleven before retreating now.

00:05:13: of course, The political worries in Germany after last weekend's elections didn't help contain stress there.

00:05:20: I'm not commenting on that one but what we know is that added to inflation stress and rising debt levels it Is NOT doing good for investors.

00:05:27: sentiment their inequities.

00:05:29: this stock six hundred traded and closed session below the fifty day moving average.

00:05:33: This morning, everything is looking in the red and European indices are more vulnerable to changes of energy prices.

00:05:39: And global economic outlook as they're more cyclical than their international peers.

00:05:44: Therefore... As I mentioned before In earlier episodes of Market Talk The European stocks will likely underperform.

00:05:51: Their technology have a US and their energy and minor rich UK peers At least until the dust settles and pressure on energy prices start easing again.

00:06:00: Well it's not catastrophic mind you because its important to remember at this point that the second quarter earnings were very strong for the stock six hundred companies.

00:06:08: Anyhow, mostly thanks to robust earnings growth and energy company's minors banks and technology companies.

00:06:14: there is no reason for this positive trend to reverse for the cited sector has given that underlying fundamentals led these.

00:06:21: juicy earnings remain in play but other sectors like airlines consumer staples and discretionaries are going pressure obviously.

00:06:30: Then the UK's FTSE hundred index which in financials, energy and mining companies also looks interesting at this point with a seven-point-seven to eight percent earnings growth there and could eventually offer diversification for investors looking to navigate through new wave of rising energy prices even though the

00:06:48: U.K.'s

00:06:48: ten year yield is pushing higher.

00:06:50: The FTSE hundreds next not necessarily driven by you case.

00:06:54: domestic matters on other hand after spectrum technology companies move their own AI led vibes this week, but they also are increasingly vulnerable to macroecomics.

00:07:04: set up these days as a big technology companies the Big AI spenders have now spent all of their free cash flow in there hand which actually obliges them to sell stocks and bonds to continue spending on AI.

00:07:17: So that ultimately means when energy prices shift higher pushing yields hence deborbing costs Up, the big technology earnings will also be directly impacted.

00:07:38: There is still this magic with the technology complex, so they manage to divert attention from worldly matters like energy prices, warming costs etc.

00:07:47: in a blink of an eye.

00:07:49: They come up with new deals all for sudden and that suddenly reverses the Marcus sentiment which makes betting against them very difficult indeed despite their well-known worries around these companies of increased leverage, rising financing costs circular deals and delayed return on their AI investments.

00:08:10: But look this by rising stress levels across global financial markets this week due to the rising energy prices and rising global yields The technology complex globally speaking outperforms On the news that open ai's new GPT-Six may be opening the gates of the AGI era.

00:08:27: Philadelphia Smile Conductor Index jumped in yesterday's trading session by Irelia in Qualcomm's stock price on the announcement of a multi-generation collaboration with Amazon's Enable Customized Silicon at scale for large-scale AI data centers.

00:08:41: They said that Intel jumped nearly ten percent yesterday, all news that it would raise the price off its PC processors by ten per cent from October!

00:08:50: That was not really good news for inflation and unfortunately enough fresh technology advances are new.

00:08:55: partnerships don't necessarily relieve brother worries for good regarding massive capital spending there increasing leverage balance sheets and the circular deals as I said before.

00:09:05: So in a few hours from now, tech investors' attention will turn to the other side of this shiny coin with Oracle due to reports its second quarter earnings on Thursday after the bell.

00:09:15: Oracle has become a bellwether for AI leverage.

00:09:18: therefore any misstep there could bring back into focus.

00:09:24: Investors want to see that Oracle's cloud infrastructure growth and its massive AI backlog are translating Thursday after the bell.

00:09:46: So this is all for today, I'm Yipega Skardeshkaya and thank you for joining me And Thank You For All Your Beautiful And Supportive Comments!

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00:10:24: So I will meet again tomorrow and until then good day trading.

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