US inflation & neocloud earnings in this week’s menu

00:00:00: Strong US jobs data pushed yields, and the U.S.

00:00:02: dollar hired on Friday reinforcing expectations of a December Fed hike.

00:00:07: this week's inflation report will test whether markets can find relief or face further pressure from borrowing costs.

00:00:14: Meanwhile, on the AI front Corvive and Nibius two new cloud providers earnings will keep discussions around AI aggressive expansion of AI in its infrastructure.

00:00:25: The cost off that very aggressive expansion and the financing well alive.

00:00:30: so welcome to Swissco Steady Market Talk today's Monday ninth of November.

00:00:36: I'm Ipeko Skardyshkaya.

00:00:38: In Todays Market Talk we'll talk about how this week data and events could shape the market expectations and the market mood.

00:00:46: And what to watch for this week, but before we do an as always please keep in mind that opinions are my own.

00:01:03: So US yields rebounded and the U.S.

00:01:06: seller rallied on Friday after the US official jobs data hinted at stronger than expected month of October for both US non-farm jobs with one hundred sixty five thousand new non farm job additions in the West last month.

00:01:20: lower unemployment despite a higher participation rate and, worst of all in terms of Fed outlook obviously faster than expected growth on wages.

00:01:29: That remember is something that all central bankers are born to avoid.

00:01:33: the higher price pressures turn into higher wages that in turn further fuel inflation expectations and inflation pressures.

00:01:41: So strong US data filled December Fed hike expectations on Friday.

00:01:46: activity on funds futures currently suggests around eighty percent chance for a twenty-five basis point high next month before this year ends from the Fed.

00:01:56: But, The decision will also and mostly depend on how inflation evolves right because the Federal Reserve would need to cool down the jobs market if inflation in US remains in check.

00:02:07: now looking at markets On Friday they rebounded U.S.

00:02:10: Heels weighting on Dow Jones Industrial Index while Nasdaq hundred rebounded one point thirty five percent.

00:02:17: Regardless as a correction to the prior session, we have mixed appetite in Asian stock market this morning.

00:02:26: Costs before example is quite calm at time.

00:02:29: I'm talking here with a meager loss of around .

00:02:46: and Huang scandal crowding the news headlines this morning, our beloved Jensen apparently had a romantic affair with someone that has been identified as Chinese spy.

00:02:58: It's too early to call the end of technology road unfortunately.

00:03:03: This week Corbyu & Nubius are due to report their quarterly results and US will be releasing CPI updates both for the mood For new cloud earnings, all investors will be watching whether strong AI demand is translating into revenue as new capacity comes online.

00:03:23: And of course weather expansion remains on schedule with the new democratic threat to new projects.

00:03:31: so I think that's going Delay the ROI and make matters worse for these indebted companies.

00:03:41: For inflation, investors will be looking for softer inflation to ease pressure on Fed expectations… And maybe offer some relief to valuations by not pressuring the borrowing costs further up!

00:03:52: Here is always a reason why a softish read could ease Federal Reserve rate hike expectations this December pool yields lower and offer a much needed relief to the US markets.

00:04:04: while stronger than expected, reports that is due tomorrow by the way could leave markets facing an uncomfortable combination.

00:04:12: That very combination of growing concerns about their AI investment outlet and interest rates remain restrictive.

00:04:19: The latter would obviously further weigh on risk appetite has already been damaged last week and encourage outflows from technology complex without necessarily making non-technology more appealing, mind you because for everyone it's pretty much the same story.

00:04:36: Higher borrowing costs is bad for most businesses really!

00:04:40: It buys into corporate earnings.

00:04:43: and no need to panic just yet Because we could argue that the earning growth in the US For example even in Europe remains strong enough To afford higher borrowing cost.

00:04:52: now FACTSET has released its blended earnings growth rate update third quarter and it is thirty one point four percent today compared to an earnings growth rate of thirty point last week and an earnings growth rate of twenty nine point.

00:05:08: one percent at the end of third quarter by september thirty.

00:05:11: so The numbers are good, they are improving.

00:05:14: now this metric combines actual results remember for companies that have already reported their Results And estimates for those who haven't yet reported.

00:05:23: but if thirty-one point four percent is the actual growth rate For the quarter for this amp five hundred earnings Well it will mark the third consider part of earning about twenty five percent And it is really not bad at all.

00:05:37: but looking at the market reaction was strong earnings.

00:05:39: It's not enough Especially for the AI trade, strong earnings from key players over the past few weeks including hyper scalars and chip makers failed to revive appetite so far this earning season.

00:05:52: Investors didn't care about their earnings growth.

00:05:55: they wanted to know the cost!

00:05:57: They focused on relentless spending & falling free cash flow rather than strong growth numbers judging that the costs of delivering that growth has become just too expensive.

00:06:07: At some point last week investors got your hopes a little bit up that Democrats, the democratic sweep could slow down.

00:06:14: That's spending by you know.

00:06:16: containing the projects and how trigger assertion rebound in hyperscalars are making outlook somehow makes.

00:06:22: but the voting for AI enablers such as chip makers data centers remain exactly what it shouldn't be was negative no matter why happens whether investors or not willing to finance our government steps end.

00:06:35: But if I expanding slows demand fall their business off chip making and data centers will slow.

00:06:41: And giving that these stocks were priced to perfection, and more of valuations could readjust again.

00:06:47: there's little doubt that AI earnings could and we'll most probably show that orders remain healthy in that existing projects continue to support revenue growth.

00:06:57: but investors right now are increasing the questioning.

00:07:00: they're increasingly worried about how quickly forward with the new democratic government.

00:07:10: So as we move on from this point on, guidance from companies will matter more than strong quarterly beats.

00:07:17: investors will be looking for any signs of delayed projects obviously in the coming months and years And any cautious behavior regarding customer commitments or Any signs of weaker visibility beyond existing orders?

00:07:31: so that's what really matters for valuation!

00:07:34: So my bottom line is Strong demand for AI today may not be enough to support valuations if tomorrow's expansion looks less certain.

00:07:45: And broadly, the question of will an AI bubble burst?

00:07:48: Well a bubble is no bubble until it bursts!

00:07:50: We always say that but in some markets especially in Asian indices.

00:07:56: we now have evidence of this speculative bubble because prices have come down sharply.

00:08:00: Korean cost index Is a good example, the index lost almost half of its value since it may peak while Chinese technology stocks also saw spectacular outflows over past few weeks and months which means that US Nasdaq is not immune.

00:08:16: If the main market narrative turns from AI boom to AI slow down, all the consequences could be further felt into the year end.

00:08:25: And it's not only NASDAQ and technology stocks but the broader AI complex including energy and industrial matters is also concerned.

00:08:33: so here Copper, for example is not a market that could see its latest trends shaken up after midterm elections both due to potentially slower AI expansion obviously or also potentially easing tariff pressures.

00:08:46: Here prices have been supported by fears of US tariffs remember which encouraged traders around the world to rush metal into United States ahead off potential import duties hence tightening availability elsewhere in the world.

00:09:01: The latter push prices higher.

00:09:02: so those threats now recede, part of that trade could unwind easing pressure on global supplies and pulling prices lower globally.

00:09:11: On top it's lower AI build-out actually adds to the downside pressure by tempering expectations for copper demand from data centers as well their power infrastructure.

00:09:22: The longer term outlook however for copper domains comfortably positive because electrification, expanding power grids and the energy transition should keep demand strong for copper while bringing new mine supply online remains a challenge.

00:09:38: And it will remain a challenge still so.

00:09:40: copper could therefore lose some of its tariff premium without however losing his structural appeal.

00:09:47: So price-wise copper gained around seventy five percent own COMEX since the beginning of twenty twenty five and traded at six point eighty four dollars per pound end of September.

00:09:58: In the recent pullback, it saw support near the six point twenty dollar level especially in last week's sell off and its rebound with technology stocks this morning.

00:10:07: from a technical perspective The price should ease to a distant five point eighty dollar per pound level before challenging that long-term bullish trend for copper.

00:10:17: so for long term traders A pull back in copper prices could actually create interesting opportunities to strengthen their bullish positions at a discount.

00:10:54: Subscribe to our YouTube channel for daily market comments and please don't forget to hit the like button on these videos so let us know that you enjoy them.

00:11:04: So I will meet again tomorrow, until then good day

00:11:22: trading!