Oil out, Tech in

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

00:00:03: It's Tuesday April twenty-first.

00:00:05: Marcus started the week on a bag food as renewed Middle East tensions waited on investors sentiment.

00:00:12: but now familiar patern may already be reemerging.

00:00:16: early weeks fell off followed by cautious optimism in hopes of diplomatic breakthroughs.

00:00:23: In between, eyes are also on economic data, corporate earnings and Mr.

00:00:27: Warsh's hearing in the US Senate.

00:00:29: so we will break down what it all means for financial markets.

00:00:32: but before we do please keep in mind that opinions are my own.

00:00:37: this is not financial advice.

00:00:46: So, the week started on a sour mood as tensions in the Middle East flared up again during last weekend and uncertainties continue regarding what will happen when two weeks ceasefire comes to an end by the end of Wednesday evening.

00:01:05: So major US and European indices kicked off the new week, giving back last weekend's but there are still at quite high levels.

00:01:13: That is just a touch below record for the technology heavy S&P five hundred and some two point thirty percent lower compared to February.

00:01:21: all-time higher level for the stock six hundred index and futures are in the positive again this morning.

00:01:27: At that time I'm talking here on hope that us and Iran will finally find an agreement This week before line and that the markets would rally.

00:01:36: So, that will really match to almost two months but turn off.

00:01:39: tensions increase over the weekend.

00:01:41: Markets sell-off on Monday they hesitate on Tuesday.

00:01:44: But then the mood improves on optimistic but not necessarily funded an often unilateral enhancement from The US which leads to a market rally into the weekend.

00:01:55: Then the weekend brings bad news and it's for ternary PCK.

00:01:58: And well latest news suggests that Iran maybe willing to join in the negotiations finally and that could may be give way too an agreement.

00:02:07: So fingers crossed, but what was interesting yesterday?

00:02:10: In market action is that crude oil actually gave much of his early week jump.

00:02:15: during yesterday's trading session.

00:02:16: US for example retreated almost five percent to close Monday session two point eighty percent up only while Brent's credit was up by only one and a half percent at the end of today.

00:02:28: And it is consolidating near to ninety five dollar per barrel level this morning on Hinstad again, Iran may join these negotiations.

00:02:35: So as a result, this is why the energy stocks barely benefited from yesterday's early jump.

00:02:40: SPDRs Energy Sector ETF for example was rather flat yesterday on oil inability to consolidate and extend gains despite its highly uncertain geopolitical environment.

00:02:51: And then Oil prices have been coming down since awhile too.

00:02:54: but Why?

00:02:55: Why are oil prices going down when the straight of home is remains actually closed and prolonged period of disruptions there or decreasing amount of energy available for months ahead.

00:03:06: Kowe's Petroleum Court, for example declared yesterday force majeure on his crude and refined products shipment saying that it will not be able to meet as full obligations due to circumstances outside its control.

00:03:22: And there is no magic The longer the Strait of Hormuz disruptions continue, the scarcer energy will get considering that around twenty percent oil flows globally used to transit this strait of hormuz before war started.

00:03:35: On other hand health is also threatening to attack oil vessels at Saudis now re-rotting via the Red Sea and it would take years!

00:03:43: A lot.

00:03:43: investment in sustainably higher prices compared prewar levels justifies these investments for other oil producers like Brazil, Guiana, Australia name and Venezuela maybe to fill in the gap.

00:03:57: So why?

00:03:58: Why are oil prices coming lower despite geopolitical tensions and supply disruptions.

00:04:04: Is it just hope?

00:04:05: That answer is certainly not!

00:04:07: Hope is clearly a part of the equation, but one of reasons that keeps oil prices from rising more is One The release of strategic reserves from major countries may have helped keep flows for awhile though they're drying up obviously.

00:04:20: And two More importantly, demand destruction has already.

00:04:27: It is actually reported that the European refineries, for example decreased their demand due to higher costs.

00:04:34: And as obviously leading to lower oil prices.

00:04:37: and remember this exactly what we have discussed.

00:04:39: at the start of this war We had said Remember that oil prices cannot rise infinitely As high oil prices would weigh on demands.

00:04:50: This has seemingly was happening today and keeping oil price or oil rallies in check.

00:04:54: Therefore, in looking at oil price charts it becomes clearer by the day that downside correction trend is being established despite absurd fake and hectic news and high geopolitical uncertainty.

00:05:06: So from a price perspective U.S.

00:05:08: script for example will remain under bearish medium-term consolidation zone below the ninety four dollar per barrel level.

00:05:16: That matches major thirty eight point two percent Fibonacci retracement on this year's oil rally.

00:05:24: the retreat toward eighty to eighty seven dollar per barrel range with or without peace in the Middle East, but a peace scenario obviously would accelerate this downside correction.

00:05:34: So what does that mean for the energy complex?

00:05:37: Now, energy stocks could retreat along with oil prices.

00:05:40: This is what it means.

00:05:41: The SPDR's Energy ETF has slipped on Friday into a medium term bearish consolidation zone after slipping below its own thirty-eight point two percent Fibonacci retracement year to date rally but... But the latest price spikes still boosted earnings in major oil companies and upcoming earnings from these energy giants will be quite interesting too.

00:06:04: watch because we could see strong results, quite a strong forecast and share buybacks that can eventually throw the floor under the downside correction.

00:06:12: Elsewhere, the technology sucks.

00:06:13: The AI related ones particularly are back in focus as latest earnings from Technology.

00:06:19: Lames came strong enough to tame part of worries regarding these massive AI infrastructure spending and unclear timeline for return on these investments.

00:06:29: but technologies playing its own leak anyway with news only pointing at expansion of AI models an applications and adoption increasing the need for more more chips More data centers from the enablers.

00:06:42: In this context, Marvel technology surged nearly six percent yesterday on news that Google is looking to develop two new AI chips five billion US dollars into Anthropaic and may inject twenty billion U.S.

00:07:00: dollars more to strengthen its position in AI.

00:07:03: as such.

00:07:03: round these magnificent seven ETFs successfully rebounded from around a key Fibonacci support that prevented this index from slipping into a medium term bearish consolidation zone itself.

00:07:16: And with technology valuations looking cheaper today compared to a few months ago, our investors are now willing to look past the uncomfortable leverage level and return on investment mix.

00:07:27: Zooming out geopolitical and macroeconomic backdrop remain quite less than ideal right now.

00:07:33: Investors are looking at economic data to see the extent of the era onwards implication all global economies in this context.

00:07:41: later Today The US retail sales were expected But that jump is due to higher energy prices.

00:07:49: So filtering out that jump in energy prices, the sales may have come under pressure.

00:07:55: That's going to be an important indication for investors regarding consumer health in DUS In Bond space.

00:08:01: The US two-year yield has been easing since end of March peak on bets that rising energy prices would have a negative impact On economic growth and may hence require a soft monetary policy from the Federal Reserve despite potential rise in inflation levels.

00:08:23: Kevin Warsh has been insisting on the idea that AI could eventually increase productivity and decrease price pressures, which would allow the Federal Reserve to cut interest rates despite a short-term spike in inflation due to Middle East War.

00:08:44: If he maintains this rhetoric while short term yields in the US could ease more and give support to equity markets.

00:08:51: But remember that Warsh has also been very critical about the Fed's outsized balance sheet, a reduction of that would hurt liquidity and equities And He is not sure to be taking the helm off the Fed on May fifteenth if his nomination is blocked until The investigation on German power was over.

00:09:08: But in all cases, activity on Fed Fund's futures doesn't suggest a rate cut before December this year.

00:09:15: But obviously the productions are highly dependent on the Middle East outcome that nobody knows what will happen there and could change quite rapidly.

00:09:24: so The only certainty is still uncertainty for equity traders don't seem to be much bothered about it at least for now.

00:09:32: So let's see what the rest of the week will bring to us, but this is all for today!

00:09:36: I'm Ipek Oskar Deshkaya and thank you for joining me and Thank You For All Your Beautiful And Supportive

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