Asymmetric risks in a busy week ahead

welcome to the saxo market call before we get started it's important we emphasize that the views and opinions expressed in this podcast are those of the hosts and guests and do not constitute investment advice or recommendations all information provided is for educational and entertainment purposes only hey everyone it's monday 28th of september 2026 and uh a bit uh intimidated by the sheet of stuff i've written down the notes for today's podcast actually there is a lot going on uh this week and it does look like a potentially pivotal week given the risks afoot let's see if these are realized of course the primary risk the markets are digesting right now are the fact that trump sort of rejected iran's overtures on talking about a deal i guess from the u.s point of view of crude oil and oil prices and oil prices and oil prices and oil prices and oil prices and sort of more or less beginning to flow reasonably well through the strait of hormuz just not iranian crude that's a problem from iran's side iran i guess was trying to emphasize the um the need for the u.s counterparts to negotiate them with with them because of the activation i'm just guessing here because of the recent activation of the hooties uh that of course taking out the um at least briefly uh taking out the east-west pipeline uh but uh the u.s uh again rejecting overtures and what will this mean i mean we have uh iran has shown the ability to to strike and do damage uh in the past in the very recent past will it do so again even though apparently it's not hampering uh at least uh of course there's we're not back to pre uh iran conflict flows of of oil through the strait of hormuz but it is flowing to some degree um a huge question hanging over energy markets hanging over all global markets of course because our uh focus has to be on this crude oil price and again more on the refined products especially uh diesel which are still very you know pinned very close to the recent highs here and then with this you know with this development over the weekend we have oil prices no huge surprise back on the bid we have global yields pinned near the highs and even at the highs depending on which geography you're looking at the front end of japan uh picking up quite aggressively to new modern highs since the 1990s uh getting a similar situation in europe and we have the germany france yield spread still around a hundred percent of the global yield and it's a huge concern there and somewhat interestingly and we're getting you know more more stories about this you're seeing a little bit more funding stress in the system credit spreads are starting to widen they've widened three days in a row uh here if we look at the sort of the high yield spreads versus uh high yield when i say high yield i mean junk debt high yield u.s corporate debt versus u.s treasury spreads the bloomberg indicator i track on that was another 12 basis points wider uh to uh what was it 294 basis points and i think that's a lot this is still pretty modest stuff by historical standards we peaked around 335 basis points not long after the breakout of this iran conflict back in the march time frame and for perspective we're coming off of the essentially almost record lows uh within this recent cycle and you know we've been as wide as something like 400 face 450 basis points uh for perspective uh during the worst part of the liberation day tariff episode and meltdown there so you know we're it's just an indicator that is showing a rising strength and we're not going to be able to do anything about it it's not an indicator that's yes yet flashing significant red but i'll put a little bit of color on this um with a look at an article big big uh i'm not sure if it was a must read or big read but it was certainly a prominent article on ft ai hyperscalers are transforming debt and it's not just about the overall level of debt which is massive what was the soft bank was out with a record high record large i should say issuance of a junk bond float 11 billion dollars uh basically to fund their open ai investment pretty remarkable stuff you look at something like um i was just pricing you know one of the private equity providers that are quite associated with a lot of this debt raised in the hyper uh in the private equity space for hyperscalers um owl bonds so blue owl bonds expiring in 20 early 2032 so we're talking about a little bit more than five years here five and a half years traded around 6.8 as of late friday so you know and that's versus a u.s treasury yield not not that far above five percent around five percent for a five-year uh u.s treasury and it's not just again in u.s dollars they're starting to issue increasingly in other currencies which means you're crowding out the uh you know funding for other things uh most notably of course sovereign uh debt itself this is a you know a rising issue when yields continue to pressure higher here uh now with this reaction across the uh you know across the risk sentiment space across here so let's i'll run through all that then i'll circle back to the equity market a couple of single equity stories that are interesting this week but uh so you know we have a general risk off the u.s futures are down after we try to sort of recover and we did recover a bit uh on friday that's not a huge surprise the dollar is kind of flat and actually we saw dollar yen rebounding uh way up into the high 157s uh from that close on friday which is in the low 157s it's you know it is a the talk of trump weighing in on the currency and japanese officials i'm trying to make some noises uh it is it is a tough headwind for the japanese yen when you have yields spiking again but we're seeing and i'm glad i started a little bit late here on the podcast you're seeing dollar yen actually returning to new local lows here since uh late last week uh solidly below 157 as their so-called chief currency um what's his name chief currency diplomat i guess you'd call him i think that's what is sort of paraphrased his title memura out saying look uh you know we're not you know he's the quote from bloomberg and the little blurb and the hot breaking news was he urges markets to heed clear japanese yen warning so whether it was actual intervention or whether it was simply this memura quote that got the market heading lower uh maybe doesn't really matter so it's heading lower once again and the dollar wasn't really getting much support from these latest developments i found that a little bit interesting so your dollar was basically sideways we're still in a clearly a dollar a surge here elsewhere let's let's part dollar yen as a issue but um it doesn't feel like it's it's gaining further momentum and i posited on friday's podcast this could be something to do with it's really hard to sort of aggressively aggressively continue at the front end of the u.s yield curve to price more fed tightening beyond the sort of three-ish hikes that are priced in already for uh you know by june of next year and uh as well with uh with these higher yields we also have gold under more pressure here we're finally starting to break down more materially bigger volatility a bigger breakdown in gold prices i wonder if some of this is looking forward to the chinese golden week that kicks off on thursday this week where markets are closed there and they're fully closed for an entire week they take their ironically very hard-working people they take their holidays seriously at least in terms of a market closures so that demand may not be there during the uh golden week period out of china but certainly to see this this big move is interesting breaking down below the 42 what was it 30-ish area in a spot gold in dollar terms and even well below 4200 this is looking to me like a full retreat back into the 4000 support certainly if we close lower on the day today and uh you know what are next levels well 4000 might prove sticky these big round levels certainly often are but just to throw a few levels out there 3500 is the big chart point there's a big sticky area on the way back up uh if we recall back to what was the sort of post 2020 there was a big surge uh um in the pandemic there because of all that stimulus and the inflation breakout uh and we saw uh sort of the low point after that big breakout back down at 1616 so if we look at sort of retracement levels that that would uh have something to do with that the next one is sort of this must be the 61.8 i didn't complete my notes here around 3137 for that one uh if you go all the way back to the big retracement 1052 so that was the big prior low major market low um you know after the huge prior high there we're talking about a 38.2 percent retracement this is much higher more relevant for the current market 3858 so 3858 is the first retracement level than 3500 sticky round level area and then 3137 depending on where you're you're starting your starting point is for which low and the size of retracement you're looking for as for silver it's also breaking down 55 dollar area looks quite important for support uh there and then you know we last week we had those three central bank meetings i thought the most remarkable one was the uh the swiss national bank meeting that looked so dovish relative to the backdrop and then some more things at the margin that were arguably hawkish relative to their prior stance but this is a central bank that is still at zero percent in this environment so you saw a decent weakening of the swiss franc i think there's a bit of a gold angle there is one of the key you know holdings of the central bank there and with gold under pressure with zero yields a slightly dovish read on the central bank relative to the backdrop and you have dollar swiss actually at new local highs and those highs stretch back some way and just just an important uh sort of perspective we talk about exchange rates and you know compare a level today zero spot 83 for example in dollar swiss compared to a spot level uh sometime back and believe it or not when i started looking at the currency market back in the late 2002 dollar swiss was at 150 uh at times back then to 167 into the 2007 timeframe, before the global financial crisis took it to a very different place indeed. But while the franc has been a very good store of value in terms of its nominal exchange rate, we have to remember carry. Carry is so absolutely critical when you're looking at the perspective and you simply cannot take an exchange rate comparison and give it meaning over extended periods of time, especially in the sort of decade plus timeframes when you have one of the currencies at a very, very different yield level than another currency. And I stuck to just some, you know, some models, some stuff in a Bloomberg tool where you can look at these types of carry differentials and what's the total return of holding one currency versus another over time. And just for perspective, so that 2002 level, or I took one, okay, beginning of 2003, all the way up to the present day, or as of Friday anyway, for, you know, if you held Swiss francs versus the US dollar. And over that timeframe where the exchange rate has approximately gone from 150 to zero spot 83, the, you know, if you include the implications of that interest rate carry, instead of being up 50% or so, you would be up on the order of 6.4%. So this is because of course you would be getting more yield on your dollar deposits over that time period. And the same goes for something even more recent, something like the Turkish lira. You know, we look at the Turkish lira, the exchange rate just continues to march higher, a dollar versus Turkish lira, continues to march higher and higher every day. Started the year around 43, currently around 49. But what would be your total return if you held a Turkish lira deposit in Turkey, you would not be down for 14%, which is what the exchange rate tells you. You would actually be up 11% because of the massive carry differential. You know, depending on the particulars, depending on of course, where you managed to get the yield on your deposit, et cetera. But that's the whole reason that Turkey is running this massively high interest rate is to encourage. Deposits to stay put in Turkey rather than go elsewhere. Anyway, I just wanted to do that little aside on the impacts of, of carry just to keep it in mind. And that's the case of course, for the end too. Now looking ahead at this week ahead, and again, it's an important week ahead with all the data we have. I didn't do a thorough overview last week of what's up and I wanted to add a couple of items in there just so they're on your radar. We have the consumer confidence number for, for of course, for September. The last one, there was an odd pickup in the present situation. And if I recall an odd deterioration in the expectations, it just looked weird. Let's see if there's any mean reversion or if there's something picking up there. Of course, the present situation pickup would actually rhyme with some of the positive data we're seeing in the PMIs and at least in some parts of the jobs market. I said, not some parts, but some, some of the data. On the jobs market. We also get the jolts, uh, opening job opening survey tomorrow. I hate that survey. It's terrible quality, low response rate, but people look at it Wednesday, the ADP, I think key there, uh, to see if the ADP, uh, private payrolls numbers sort of jive with the, uh, what the official payrolls numbers have been saying over the last couple of months. Uh, and because they're much lower for, uh, August at least than the NFPs were. And then we have the PCE inflation data. Now this is old stuff. You know, this is, this is August data. Still the market may be a little bit sensitive to it if we get a surprise. And then the ISM manufacturing on Thursday. And of course the standard jobs report is up on Friday as noted. So all that feels kind of important for where yields are, where the expectations for the fed are, where the U S dollar is, uh, as well. And it also feels like if these are particularly strong numbers, uh, if the pattern is that they're swimming all in the strong direction and this sends yields higher, still you have the irony that it could be actually negative for the stock market. Of course on the, uh, uh, on the implications of higher rates more than on enthusiasm for a stronger economy. And while we're over in the macro space here and FX just want to point out, and it didn't, it was not on my radar last week, but Burnham will be speaking. I believe it's a labor party conference tomorrow on Tuesday. And this, this could be the big one. I mean, this could be the big sort of, you know, rubber hitting the road on what the policy makes will be. I think it's going to play poorly. I think it's more nuanced than I don't know how, uh, it will play. What I mean by nuanced, I would put in a small, uh, story that I don't know. I don't know if it's going to play poorly, but I think it's going to play poorly. I don't know if it's going to play poorly. I don't know if it's going standard or European type tax load, but they have extremely, and I mean, extremely low taxes on housing, especially property taxes, essentially non-existent property taxes. Uh, for somebody like me from Texas, this is completely inconceivable. Texas likes to brag about that. It has no income tax and that's somewhat unusual in the U S and hip, hip, hooray. But how do the local schools get funded and your school district? Well, they get funded through property taxes, which are reasonably hefty. And have to be to, of course, to be able to fund the entire school system, which is not cheap. So, you know, what does this mean? It means, of course, it's a, it's a wealth inequality issue in the case of the UK. And I find it remarkable. So I'm just curious if there could be some kind of, there's been talk of it for ages in the UK. Could this be the rebalancing? Uh, it would certainly make sense just from a logical perspective to not tax working people, uh, at higher rates. It does not make sense to disincentivize, uh, effort. And, uh, enterprise, whereas on the wealth side, it makes sense to introduce something that every else of your other country has, and you can start it maybe at a low level. I remember standing, uh, just for perspective. I lived in Surrey for a couple of years when I lived in a London area at one point, a small town and, uh, was renting a place. The rents were very, very high for what the quality of the housing was. And a couple of doors down, I knew a couple, a wonderful couple, and they had bought their house for maybe, 15% of what it was worth. Uh, and not even that insanely long before, uh, they were living at the time. So we're talking about a house price appreciation on the, on the scale of five, 600%. You're on the scale of maybe 15 years would never be able to afford the house they were currently living in. We're even getting some assistance from, uh, their own parents to help send their kids through the private schooling system, um, you know, because they wanted the best for the kids, et cetera. And then you go down to the, the train station and there's this sort of green area behind the train station, which, uh, from what I understand was owned by some multi-generation, uh, maybe even somebody that's, uh, what are they called? Somebody in the nobility or whatever. In any case, this is a extreme, obviously extremely valuable land centrally located in a high demand area. And the person owning that land, uh, does not have to pay one, uh, one penny, one pound in taxes. They can just sit on that and it appreciates at insane levels over time. Uh, and of course with a property tax, if, if you have a property tax on a piece of land like that, you either, uh, still hoping maybe it'll appreciate over time, but over time as well, it gets much more expensive to just let it sit there and maybe you need to develop it to get some income from the property to pay for that tax. Of course. Um, yeah, I'm sure the, my, my UK listeners are, you know, want to get out the pitchforks and come after me for saying this, but I think it's a rather strange system. Uh, and it would make sense to me for him to go just from a labor party perspective to go after that, even if it's in cautious fashion, rather than going after taxing income or, and especially going after maybe higher capital gains or going after a higher levels of, uh, higher levels for, for higher earners. In other words, you know, taking the, the, you know, the net, uh, income tax levels to maybe over 50% or something. If you earn, let's say over 300,000 pounds a year or something like that, you're going to have to pay for that tax. Um, and by the way, yes, I am aware that there is this, uh, what is it called a stamp tax? Uh, basically if you sell a house over a certain value, uh, there's a quite a hefty fee that you have to pay on the sale of that house. But this is based on the volume of the housing market, not based on the year over year, uh, time. And it would make sense to me to actually have that tax be lower and just for there to be a property tax, but don't come after me for the pitchforks. I'm not in control of, um, UK tax policy anyway, but at this point, I'm going to have to pay for that. I'm going to have to pay for that. But this is a very important, uh, pivot point, potentially one for the ages. If, if it goes aggressively enough on this issue and there's lots at stake for, for gilts and for Sterling, which has gone pretty quiet. We've seen Euro versus Sterling getting up to those levels, uh, that are so critical zero spot 86, uh, 10 or 20 or so, uh, it's backed down a little bit, but, uh, watch that one tomorrow for the longer term implications. All right. I think a little bit pointless to wrap up, uh, you know, to round out to what happened on Friday. Yes. A little bit of risk on pretty, pretty decent risk on in fact, in the semiconductor space that reversed again with this Friday news, uh, with Trump rejecting, uh, Iran's overtures, Kospi was down. So we seem to be slightly negative vibes across the high momentum space. One little point of concern, in Friday's market or Friday's podcast, I talked about Akamai as having gotten some kind of takeover offer. That was completely wrong. That was something else I was reading. Akamai, in fact, was up very strongly because of a deal with Anthropic up to, it was at $11.6 billion for cloud infrastructure. That was the reason Akamai was up so strongly. I guess it was on Thursday's session because I was talking about it on Friday. So apologies for that inaccuracy. We also saw Friday, Meta was down. There's been a huge surge of interest in Meta over this Muse product and especially the Charm device linked to that Muse product. Maybe not especially that, but also the Charm device linked to that Muse product. I'm very skeptical on this stuff. I think long-time podcast listeners will know that I'm not a huge marketer. I'm not a big Zuckerberg fan, but I can kind of see some of the usage cases for this, especially if it encourages you to decrease the intensity of your interaction with your phone. So if the AI assistant can actually simplify your life to some degree like some of these watches do, if you use watches the correct way with your phone for notifications and filtering those rather than having to get pinged every time on your phone, et cetera. Super interesting, potentially. I'm going to do some more thinking around this. I will just say this. I do think that this may. Meta's Muse and or the Charm. Not and or, but and the Charm itself will either be a complete flop and be completely irrelevant or it'll be a massive winner and could make the company the most valuable of all time. So I don't know which it'll be, but I do think it's something worth tracking clearly if that would be the case on the latter. All right. And then we have SpaceX. So their Starship 14 is set for launch today. In fact, probably before most of you have heard this. Or many of you have heard this podcast. 1215 GMT to 1330 GMT. So if you're here in mainland Europe, that's 215 to 330 this afternoon. Starship 14, it'll be the first orbital launch if it is successful. And they'll actually be launching some commercial Starlink satellites rather than simply testing out the Starship to see if it works. They did manage to land the 13 apparently so softly in the ocean, the Starship part of it itself. That it floated around and they were actually able to retrieve it for study. So, you know, this is very important and, you know, almost existentially so each one of these launches because it is a key part of their future business model. But also look back at that link in Friday's podcast episode description to this FT Alphaville article on, you know, SpaceX is it's not really that much of a space company. Most of their most of their space launches are their own or for their own needs for the Starlink system. There hasn't been this massive. Growth in launches outside of their own launches and outside of, you know, a pretty chunky, you know, let's admit it's good business. A chunky bit of government slash defense launches. So curious what the long term argument is in favor of this. Mars is complete nonsense. If you ask me commercially, I'm very skeptical on the whole orbiting data center idea as well. But let's see. And regardless, the Starship 14 launch is. Quite important for the company. And then again, on earnings coming up this week, huge highlight on Wednesday, you know, one of the great growth stocks of the last couple of years. Micron is out reporting. There's chatter about, you know, memory companies are going to absorb some massive chunk of. A total S&P 500 profits because it's such a bottleneck and so critical for AI inference, et cetera. And then far smaller company, especially now Thursday, we have Nike up. They're dealing with their shrinking China business. And just their inability in general to reignite a sort of growth story. What a tragedy that stock has been trading up towards 180. I think at the highs post pandemic breakout when their model business model was working so well. What are we talking 2022 or so? Was that high? And now trading at pushing down towards the $35 per share area for that stock. I will have a couple of links again in the podcast episode description. The one for the AI hyperscalers and their debt. And then here's a very interesting one. I should have maybe woven it into my comments on the broader market. And I heard this same thought and claim echoed sometime back actually already in a podcast interview about those very skeptical about the ability of AI to grow from here. Simply because the, you know, all the data center growth simply there's not the power. To feed it. So there's, you know, you can build, you can tell me you're going to build 10 data centers. That's fine. But if I can only power four of those, how relevant is that growth? And that is, that is critical. It could be the reason, one of the reasons why bloom energy was up over 8% on Friday. And maybe some thoughts that some of these data centers, especially in Oracle, which is bound to give investors return. Even if that data center, that one data center that was the focus of a recent story is not operating, that they'll be willing to pay through the nose for some bloom energy fuel cell solutions to. Providing energy into the data centers. But it goes through some remarkable data, even claims that some of these data centers slated to start operation this year, they haven't even broken ground on them. And then you have to, you know, backtrack into all of the anticipated demand and growth in the hardware, the GPUs, et cetera, that are meant to go into the servers that are meant to go into these data centers as well. And if you can't build the data centers, then of course there is going to be. Less demand, perhaps than anticipated because of those speed limiters called power for the actual computer hardware. In other words, have we overpriced, over extrapolated potential AI hardware growth when the bottleneck is simply electricity? So I think worth considering, especially of those of you who are heavily into the whole AI story. Finally, I'm going on a little bit too long here, but I cannot recommend enough, especially for those of you that are interested in history. And finally. Making parallels from history and applying them to other times like today, obviously. This article link, and maybe I'll put the link in today as well, to, I'm forgetting the publication, talking about this Bronze Age. So the Bronze Age collapse, if you don't know, there was a huge collapse across the Mediterranean and even into the, you know, Anatolia and over to the Fertile Crescent. So the, you know, the Babylon, these types of empires. There was a whole collapse of civilizations all the way across. Even Egypt was existentially challenged at this end of the Bronze Age, the so-called Late Bronze Age collapse. And there's a guy that wrote a, I think his name's Eric Klein, wrote a nice historical study of this, which I read. And, you know, some of the, you know, the description of it is fascinating. Why did the Mycenaean Greeks, the Hittites, some of the major Babylonian civilizations, what happened? Why did all this suddenly collapse? And this article that I sent a link to in Friday's podcast episode description suggests, and this seems so plausible to me, is that it was the invention and spread of iron that was the key. Because what did iron do? If you don't know how bronze is made, bronze acquires both copper, which is reasonably common, and tin, which is extremely hard to find, especially back in those days. So it took sort of centralized empires that could get access to the trade routes. And bid up, I suppose, for the tin to create bronze, which made a fantastically better weapon, by the way, than copper, which was the prior, some of the prior weaponry, because it is much harder. The tin does the hardening in the bronze formulation there. And so basically it was only large organized empires that could have access to significant amounts of bronze weapons for use in warfare. Iron, on the other hand, first of all, massively used. It's very easy to find. It's all over the place. It's very common in the Earth's crust, but was very, very difficult to make because it requires a much higher temperature. But then the technology was invented and was easy to copy of getting those sufficiently high temperatures to create iron weapons, which are actually not better than bronze. I always thought they were, by the way, much more brittle. It's actually an inferior weapon, but it's super cheap to produce. And as he says in the article, what was the phrase here? Oh, yeah. It led to this iron weaponry, a mass decentralization of weapon production and a democratization of violence. What a horrible thought. But that may be what drove basically anybody that could band together in decent numbers could create a bunch of iron weapons and wreak all kinds of havoc. So why should we care about this as being anything besides an interesting historical interlude? So what? Well, he. He makes us a brief stab at it in the article, but posits that perhaps these drones, for example, are risk, at least some kind of parallel democratization of violence. That's a scary thought. This is the opposite of what nuclear weapons did, which made sort of war impossible. If drones are easy to produce, easy to sort of mobilize in the wrong hands, obviously. this can create all kinds of mayhem. little bit here in terms of Russian hybrid warfare, et cetera. Don't want to get too far into that direction, too doom and gloomy, but I thought it was just a super interesting article, both from historical perspective and then just thinking about how these new weapons and this asymmetric thing, like we've seen with Iran and its ability to create all kinds of mayhem far above its size as a productive economy, et cetera. For the first time, I think creating this kind of mayhem on a scale, it's a bit scary to consider if it does indeed continue. And it makes the whole threat, going back to the very top of the podcast, going back to what is impacting markets right now, it makes the threat very fearsome if they're able to, again, successfully launch another series of attacks with this asymmetric approach to warfare. So that's rounding it all out. On that happy note, stay very careful out there, and we'll be back tomorrow with the next Saxon Market Call. This has been the Saxon Market Call podcast. Thanks for joining today's episode. We're always happy for your feedback and questions of all kinds. To reach out, you can drop us an email at marketcallatsaxobank.com. That's marketcallatsaxobank.com. Saxo, serious trading worldwide. We'll see you next time.