Oil pullback, Muse AI popularity fuel optimism

00:00:00: Hi and welcome to Swiss Coats daily market talk.

00:00:03: It's Tuesday, the second of September.

00:00:06: Oil prices are retreating this week on Middle East Peace hopes while AI Optimism is rolling back as Meta's Moose-AI fuels expectations for a new wave of agent driven computing demand into a week that will be relatively quiet in data and events.

00:00:23: Meanwhile The Yen is weakening again after the Bank Of Japan failed to sound sufficiently hawkish last week reviving intervention risk and vicious yen treasury yield.

00:00:33: But if oil continues to retreat, the picture could brighten further into the week.

00:00:38: Easing energy-driven inflation fears could pull global yields lower.

00:00:42: The latter would relieve pressure on central banks and give risk appetite more room To run.

00:00:47: so we will talk about all that and more but before We do an as always please keep in mind that opinions are my own And this is not financial advice.

00:01:02: This show is brought you by Swiss quote.

00:01:04: What a difference we can make, right?

00:01:06: Last week started with create oil prices hitting fresh highs since the month of May while AI enablers were being battered by news ad.

00:01:14: Frontier AI model providers like OpenAI and Anthropic & Grog as well who are calling for slower progress on technology front to save humanity from dramatic ending.

00:01:26: I'm exaggerating but calls were close in some science fiction movie.

00:01:30: This week kicks off with crude oil retreating sharply on Middle East peace hubs and AI enablers row-ring on news at MuseAI.

00:01:38: Meta's latest personal AIAgent has risen to top of mobile app charts, reshuffling cars in favor of the AI trade.

00:01:47: MuseAI capable drawing data across Metas apps connecting third party services and completing tasks on a users' behalf filled AI demand expectations.

00:02:00: as agent would need more computing power than a general-purpose chatbot.

00:02:04: Now looking beyond, Muse AI is the first one.

00:02:07: others will likely follow though this expansion into third party services won't be a walk in their path.

00:02:13: Amazon, for example already blocked Muse AI from reaching its services.

00:02:17: They don't want MetaBots to spy across it's own ecosystem.

00:02:21: and certainly a matter of time before Amazon powered an other company-powered AI agents hit the web.

00:02:27: What?

00:02:27: Time To Be Alive!

00:02:29: So in the markets with this news meta jumped more than eleven percent yesterday trading session.

00:02:34: you can clearly see technology breakout matching price break out on that chart.

00:02:39: Meta has broken past the bearish trend building since summer of the year.

00:02:46: Philadelphia's SMI Conductor Index rallied more than four percent yesterday with CPU makers leading the rally as news.

00:02:53: AI and likes would create stronger, inferenced demand without however telling whether that will require significantly more GPUs, HBM or data center capacity then what is already being built?

00:03:07: As such, AMD rallied as much as ten percent yesterday to one trillion dollar valuation.

00:03:12: Intel jumped twelve percent.

00:03:14: The Taiwan is tiny X index rally nearly two percent today in Asia while Korea's membership maker Heavy Cosby is up but it's by less than one per cent at the time I'm talking here this morning.

00:03:25: We don't know how these new AI agents will impact HBM demands Over in China.

00:03:31: Tencent and Alibaba rose as well.

00:03:33: The former on a new AI image generating model and also on hope that the company could come up with an AI agent similar to Muse AI's on this WeChat, which is a app that has home-to so many other apps.

00:03:45: And the latter, Alibaba after revealing The Most Powerful AI in China To Compete With NVIDIAs.

00:03:52: Relatively, NASDAQ hundred jumped nearly three percent yesterday passed at thirty thousand mark every trading.

00:03:58: oil prices help pulling global yields lower.

00:04:02: A further retreated energy complex could improve risk appetite through the week.

00:04:09: set to be quiet from a data perspective.

00:04:12: Investors will rather digesting the latest rate hikes from European central bank, the Fed and Bank of Japan The fact that easing energy prices won't automatically pull refined product prices lower That shipping costs have been rising along with energy prices And trade war is still running in the background.

00:04:31: Though trade headlines lose attention on their unpredictable and childish nature.

00:04:35: Still US & China talks this week are going well reportedly into Xi Jinping and Donald Trump's summit due Thursday this week.

00:04:44: Zooming out, looking at the data we have flash manufacturing PMI figures do.

00:04:49: That will give a hint about how global economies dealt with the rising energy prices in the first half of September.

00:04:56: But to be perfectly true, September has not been a great month for global economies from a macroeconomic perspective!

00:05:03: The rising energy price actually pushed global yields higher?

00:05:06: Three major central banks hiked their raise on September, the ECB for second times this summer, the Fed for third time three years and Bank of Japan.

00:05:18: More rates are expected to continue fighting the rising inflationary pressures in these locations.

00:05:28: where they explicitly opened the door to consecutive rate hikes and even larger moves if inflation warrants them.

00:05:46: A last lack of sufficiently forceful forward guidance, plus two dissenters at last week's decision disappointed FX Marcus.

00:05:54: The Dollar Yen spiked to one hundred fifty-eight level as yen beers flocked back in And we can see upside momentum building slowly in the dollar yen!

00:06:03: The latter is bad news guys for all those who hoped that early September reversal The dollar yen was marking the beginning of your brother in a longer lasting yen appreciation.

00:06:15: It is also uncomfortable news for the US Treasury.

00:06:19: mind you it appears that Scott Besen was less the house than he thought it would be.

00:06:24: He actually needed B.O.J to play along, raise-raise sufficient, the end sound sufficient and the hawkish stopped bleeding in the Japanese Yen!

00:06:31: The latter reduced a need for repeated effects intervention but allows.

00:06:35: today we are back at square one… maybe even worse?

00:06:39: Because the embers obviously eyeing the overpriced levels again if they can't adjust inflation expectations toward where markets think fast enough, that's the important thing.

00:06:51: Fast enough bearish end positions will continue to build and The fact that the Fed may have started on its end a tightening cycle could also widen the policy divergence between the fed And the Bank of Japan potentially widening the yield differential and putting further downward pressure On the Japanese yen.

00:07:10: so the circle begins again.

00:07:11: renewed yen weakness increases the risk of another intervention.

00:07:15: Financing these FX interventions through reserve assets puts additional pressure on market, although note that Japan now has mechanisms.

00:07:25: Mechanisms including the Federal Reserve's FIMA repo facility for example could eventually reduce the need of outright treasury sales but on the other hand weaker demand for US treasuries from other major holders is already putting upward pressure on U.S.

00:07:41: yields through a different channel and the latter Helping China, for example is decreasing its US Treasury holdings completely separately from this issue.

00:07:51: As a result possible higher US sales could widen the U.S.-Japan rate differential and reinforce incentives to sell again.

00:07:57: And the circle begins again and again.

00:07:59: So the cleanest way out of this inferno-circle Is therefore faster BOJ normalization.

00:08:05: But until market has become convinced that Japanese rates are moving sufficiently toward neutral levels The weakening yen affects interventional loop risk remaining with us and traders will probably continue trading that loop until something finally breaks it.

00:08:19: I published a video on FX Interventions yesterday, you can have a look for more details about FX Intervention's how markets behave And How You Can Trade Pre- and Post-Intervention Periods.

00:08:29: But this is all for today!

00:08:31: Im Ipeco Skardeshkoja.

00:08:33: Thank you so much for joining me and thank you to all your beautiful and supportive comments.

00:08:38: 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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00:09:08: So I will meet again tomorrow, until then good day trading!