A dangerously ignored reality?

00:00:00: Good morning everyone and welcome to Swiss Coats Daily Market Talk.

00:00:04: It's Monday, the eleventh of May.

00:00:06: we just learned that U.S rebuffed the Iranian peace proposal and oil prices are up this morning as a reaction.

00:00:14: but the technology heavy indices like KOSP for example jumped record high levels once again by Smy Conductor and AI Link stocks.

00:00:24: Of course, the divergence between technology and non-technology names is now becoming increasingly striking with oil prices back above a hundred dollars per barrel level this morning inflation figures due to this week and valuation stretch markets may be entering a dangerous phase where optimism increasingly disconnects from reality.

00:00:46: but Who knows how the market will react and what's next, so I'll try to make sense of headlines and market moves again today.

00:00:55: But as always please keep in mind that opinions are my own and this is not financial advice.

00:01:10: So congratulations.

00:01:12: ladies & gentlemen we just reached a Monday point where war headlines don't bother AI investors anymore!

00:01:18: because despite waking up to the news that U.S just rejected Iran's peace proposal and that the Strait of Hormuz remains closed, And Despite The Fact That US Could Rebounce This Morning Back To About A Hundred Dollar Per Barrel Level Which Is A More Than Five Percent Jump Just This Morning With No Retreat In Prices Just Yet At The Time I'm Talking Here.

00:01:40: Well The Korean Cosby Index which was Remember One Of The Most Sensitive Indices Oil Prices is Up By More Than four and a half percent to a fresh all-time high level at the time I'm talking here.

00:01:53: Elsewhere, then the K is struggling to push higher with that one point seventy-one percent retreat from an all-Time High Level while S&P five hundred NASDAQ futures are flat this morning with stocks and foots of futures even pointing at meager gaze at the open.

00:02:10: So it's hard to make sense of the market reaction this morning.

00:02:13: It feels like a calm before storm because higher energy prices will hit the ground sooner rather than later as Middle East tensions prolong and the world's energy stockpiles are just drying out.

00:02:24: But that's something that investors are not willing to think about this morning, apparently.

00:02:29: So let's talk more encouraging news!

00:02:32: Last Friday US jobs data came in as great at it possibly could.

00:02:36: I was saying.

00:02:36: the best possible outcome for this data would be higher than expected job additions number combined with softer and expected wages growth remember?

00:02:44: And thats exactly what the data printed on friday!

00:02:48: more than sixty five thousand expected by analysts and three point six percent wages growth on a yearly basis.

00:02:57: that's more then three point four percent printed a month earlier but it is less than an acceleration to three point eight percent expected and penciled in by analysts.

00:03:07: In simple terms, that's the sweet spot!

00:03:09: That is best of both worlds from a market perspective because it means that US jobs market weakens yes but remains healthy enough to rule out an immediate meltdown.

00:03:20: and wages growth remains higher than the Federal Reserve.

00:03:23: two percent inflation target Yes And It Is Also Accelerating Yes But Accelerate Less Than Penciled By Analysts.

00:03:31: And cherry on top The Michigan.

00:03:33: This one and five year inflation expectations were also pulled lower on Friday's data as it signed out.

00:03:39: the Iran War, and rising energy prices today have not pushed inflation expectations further up.

00:03:45: Now this may be because sentiment and way people perceive market conditions weaken.

00:03:50: but hey that didn't necessarily demoralize investors.

00:03:54: Not when the US two-year yield eased on relief that Federal Reserve could actually keep quiet with no need to intervene and fight inflation yet.

00:04:04: Bad news is that the U.S.

00:04:05: Two Year Yield kicked off a week jumping, unfortunately.

00:04:09: because yes, bond investors look like they care more about the jump in oil prices than technology investors do but their S&P five hundred and NASDAQ futures again quite serene this morning.

00:04:21: Well, the dough is a bit less comfy though with eight point twenty percent fold at the time I'm talking here.

00:04:27: that's exactly what i'm talking about tech versus non-tech and we see it again this morning anyway.

00:04:32: friday sweet jobs data gave a boost to equity markets At least two of technology ones because s&p five hundred nazak traded at fresh record highs.

00:04:40: on friday nazak rally two point thirty five person as ar names led the rally Again And This Time.

00:04:48: That's important.

00:04:49: and I think, despite some unideal news on the headlines.

00:04:52: Because first TSMC posted slowest pace of revenue expansion for months since October while Co-Weir which is an NVIDIA backed Neocloud provider saw its shares drop more than eleven percent.

00:05:05: Friday after giving a disappointing outlook.

00:05:09: Together, the news revived concerns that the turret AI graph may not be sustained in the coming years.

00:05:15: But again... The latter did NOT prevent Van Axe's myconductor ETF from pushing nearly five percent to a fresh all-time high level just on Friday!

00:05:27: So my conclusion is.. The market isn't reacting anymore as it has become huge because investors buy and prices go up.

00:05:36: At this point, I'm really wondering what will cause this rally to retrace because at some point in time and maybe soon enough we'll see a downside correction.

00:05:47: The S&P-Five hundred is up by more than sixteen per cent since the beginning of April And it's trading overbought territory from mid-April.

00:05:56: Now earnings beats sure explain the latest enthusiasm and strong appetite since past two weeks, but the fact that a sharp rise in energy prices do not even bother anyone is curious.

00:06:11: real curious.

00:06:12: Actually, it does bother the non-technology names but no one cares about Non-Technology Names when technology names are doing so great and pulling markets higher!

00:06:20: Now this week for those who're still interested by reality of things attention will shift to inflation figures.

00:06:26: while The European Inflation is expected to confirm heating in April due to the higher energy prices that we'll probably be coupled with a softer growth number as well.

00:06:36: all expectations for U.S CPI or rather Balanced according to estimates on Bloomberg survey the US headline inflation may have even slowed in the month of April On a monthly basis only yearly bases.

00:06:49: We could see it rise from three point three two Three point seven percent still.

00:06:53: that's because Iran war related jump in energy prices has already shown In last months figures making the monthly figure look less threatening than the year you want.

00:07:02: But well inflation within the three-to four percent range and the West remains well about the Fed's inflation target, which is too pretty And we'll continue to keep the Fed holds alert.

00:07:12: It's, however worth noting that the current doubles are still below the paying threshold of above five six seven percent inflation that we saw post COVID and post Ukrainian war led energy crisis.

00:07:24: So to me a reasonable inflation print could keep investors in a sweet spot.

00:07:29: if the fed does could outweigh the hogs on idea That there is no need for rate cut from the Federal Reserve this year Unlike the European peers, for example that are expected to hike their interest rates.

00:07:41: and for some like the European Central Bank as soon as June monetary policy meeting.

00:07:46: And that dovish divergence if confirmed this week should continue to weigh on US dollars outlook in the mid-term run!

00:07:54: In the short run, however.

00:07:55: The US dollar's direction will continue to be driven by oil prices.

00:08:00: higher oil prices Will give support to the U?

00:08:02: S dollar while lower oil prices?

00:08:04: We'll let it soften and this is why we see a rebound in us dollar index This morning due to jump in oil prices.

00:08:11: all though although I must admit that even here, the US dollars rebound this morning looks softer compared to gravity of the headlines or reaction we would have had a few weeks ago.

00:08:23: But anyway for longer term traders geopolitically oil driven led US dollar rallies remain interesting opportunities to sell tops against major peers with however great deal of volatility and their impact on FX markets as well.

00:08:40: So this week, besides the war headlines and a couple of earnings well investors will be closely watching The US President's first visit to China since two thousand seventeen.

00:08:49: Yes last time the U.S.

00:08:51: president went to China it was twenty-seven and it was Donald Trump.

00:08:55: Biden didn't just go to fix the things, he preferred to continue his trade war that Donald Trump had started with China.

00:09:02: Now there is no doubt talks will likely be intense even though Trump and Xi are good friends.

00:09:07: Trump needs to bring big headlines home to divert attention from the Iranian War.

00:09:12: but on the other hand China today is becoming more powerful than ever thanks to its technology catch-up electric vehicle and other energy transition goodies That actually showed up in their trade figures despite geopolitical and the trading chaos that we are going through today.

00:09:29: Because a trade surplus in China simply jumped sixty five percent in the month of April, in US dollar terms And despite it twenty-five per cent rise in imports certainly due to high oil prices.

00:09:42: Inflation in China has also accelerated in april Due To Higher Energy Prices But China Has Been Finding Deflations.

00:09:49: Since Post Covid Era Hence The Country Does Have Margin for longer than his other Asian and Western peers.

00:09:58: So it's going to be very interesting, I think we will see big headlines but whether the headlines could derail the markets from further rally or not is yet-to-be seen!

00:10:08: This is all for this Monday.

00:10:10: i'm Ipek Oskar Deshkoja.

00:10:11: thank you for joining me and Thank You For All Your Beautiful And Supportive Comments.

00:10:17: This episode of Market Talk has been helpful and it's insightful to you.

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00:10:49: And until then, good day

00:11:05: trading!