Burnham declares end of Thatcherism. Micron earnings on tap.

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 is Wednesday 30th of September 2026 and fairly quiet markets given we saw those new highs for the cycle in yields yesterday though that rolled off a bit. We saw some very negative US data today but the market was surprisingly non-responsive to that and actually the yields fell back of their own accord a bit. I'm sorry, they rose back of their own accord a bit after falling and then we had the New York Fed's Williams out speaking on what looked an awful lot like forward guidance. I wonder how this played with Fed Chair Warris talking about there was no urgency in further rate tightening and he saw some support for the one potential further rate hike this year. So we saw a decent markdown in the October odds on this, still priced surprisingly close to 50-50 perhaps, surprising for some at least given where we're not sure where this Fed is at least in Worsh's thinking and there are of course other members that have been a bit more explicitly hawkish. So rates were kind of all over the place. Again, we saw new highs for the cycle. They sort of fell back down of their own accord ahead of the US data. The US data delivered was very bad. We saw what was at the consumer confidence data for September after that and I noted the August present situation number ticking up quite oddly and quite strongly. That was revised down quite a bit so all the way from 121 plus to 117.2 and the new number came out at 109.3 so a massive drop there. Clearly some linkage there to the weak Trump polling and of course one of those key variables in American psychology is that price for gas at the pump which for diesel has hit record levels and we're not that far off in regular gasoline grades either. The expectations component also knocked quite a bit lower. It was 68.2 in August down to 63.6. Now for perspective, that present situation, there was one reading I believe it was or one overall reading, now I can't remember which, didn't note all of this down, that was the spike on Liberation Day tariffs but essentially if you look at the overall index and sort of ignore the worst couple of readings there around the pandemic, we're at the worst levels if I've made notes correctly since May of 2014 on the expectations component. Here it is. Yes, there was one spike that was lower for the Liberation Day tariffs month. It was April of last year. If you if you ignore that month, which was a spike, we're down at March 2013 for the last time expectations were this low. So you know we're getting into areas where traditionally you look like you know looking for the coincident indicator being that job prospects are poor and cue the jolts job openings, a horrible quality survey, but nonetheless it was out and it was quite weak. In fact the overall job openings reading at under 7.1 million was the weakest in eight months, way under shooting expectations. But then we've had these you know we've had these strong couple of non-farm payrolls reports. Maybe we should be setting up expectations for something that's more in line for Friday and the ADP never really picked up. So curious to see what the ADP, which is the private payrolls alternative survey here, what it's showing today. We also have the PCE core inflation readings. We've had this strange guidance or overlay from Warsh that he's looking less at the core for some reason even though this was meant to be the you know the absolute guide for the feds reasoning. It is out today and importantly the Bureau of Economic Analysis that produces the PCE inflation data. Now this is for August so it feels like ancient history now that we're ending September here today, but they're releasing some you know reconfigured calculations of former data and the expectation is for this to come down and there might be a little bit of spin around the annualized rate which inflation has been running over the last handful of months in those revisions through that August data. Which you know the conspiracy theorists will be out arguing the Fed might use to delay any further decisions on further rate hikes. Meanwhile we have the confusion of the Warsh overlay a rhetorical you know spin on Corbyn less important than headline etc and headline certainly galloping with with oil prices doing what they've done. But let's keep in mind you know that you look at the oil price and you always have this sort of latest Brent contract at the top of your screen but that thing is hardly trading anymore. We're rolling into all the volume is rolling into the December contract and we're going off off this November at a price right now. I don't didn't check which date expires very soon here. Well at 103 spot something and we're rolling into a contact in December that currently is trading at just above $97. That's a pretty big cliff and just shows how tight the market is for prompt crude and that the assumption is that crude oil is flowing or is it because refinery runs aren't there so there's less the crunches is less in the crude price and it's more in the refinery runs and it's the products that are not easing we'll have Ulla on soon to talk about that again he is away on business at the moment so we'll certainly have an update of that next week there's lots of back and forth out there about to what degree this these this flow data is being somewhat you know over or somewhat exaggerated relative to the reality on the scene but one calculation was that you could actually you know take the numbers the real numbers out there for how many crude oil cargos are delivered and it's something on the order of twelve point something million barrels versus eighteen or so ish barrels before still a decent size to say the least shortfall relative of course to the state of play or status quo before the Iran war broke out and yeah so you know without yields managing to come off their highs there I guess that helped the the US market to avoid the worst or avoid much collateral damage sentiment pretty stable you know tiny downs if you look at the the big indices the S&P 500 the Russell 2000 was down a little bit more the AI hardware space a little bit more positive slightly positive the Nasdaq 100 and more than 1% positive on the the Philadelphia Sox semiconductor index some mixed action overnight Korea open higher closed I think about unchanged or a little bit indifferent relative to the highs of the session Nikkei quite strong here and if we look over at Japan we see a strong two-year auction there was more follow-up strength in the Japanese yen overnight maybe a little bit of follow-through excitement from the New York Fed's William speaking etc there was a strong again the strong two-year auction into quarter end there could be some rebalancing who knows I was a bit surprised to see with with yields still quite low that the the yen crosses were backing up as much as they were this morning so we're gonna see more frustration and backfilling or is this just a little hiccup and maybe we can see where things stand or need to see where things stand as we transition into October while you know the indices and equities were pretty steady we're seeing a further aggravation of high-yield credit another six basis points added to that Bloomberg high-yield credit spread indicator at 309 basis points again I mean it needs at least another 40 or so before it starts to look anything remotely resembling amber or worse but the direction is a concern and should certainly be noted a lot of a lot of noise afloat as well on AI linked company bonds CDS prices etc and as I noted this is contributing to a worsening and the worst levels in fact for quite some time since the Liberation Day episode in fact for our broader of you know financial conditions indicator one thing that's certainly very absent from adding to the negativity there is the VIX which is still pretty darn quiet at the moment and then we saw it yesterday at me if you look away from dollar yen you saw the dollar following through stronger we actually tested to new lows since May of last year in the euro dollar hitting below that 113 25 level trading handful of pips below that but then we've backed up again is this in the month is this the is this the William comment certainly women comments did punch rates pretty sharply lower there when I say rates should say Treasury yields at the front end of the curve so that's helped the you know the dollar back away from you know pushing through to into new highs and really it is the key it's it's tough to argue for a significant break when we're all waiting for this key data through Friday's jobs report that's when the probably the bigger flows will happen once that data is out of the way and that's the way I do like to think about it the market wants to do what it wants to do and often the data is just there as an excuse surprise side on the data would be weak data in general everything from today's ADP and PCE to tomorrow's ISA manufacturing and then of course the Friday jobs report itself but before I head away from macro a couple of things worth looking at here first of all I'd like to talk a little bit more about what's happening in the euro dollar market and what's happening in the euro dollar as it relates to the euro dollar and what's happening in the euro dollar at the moment and then I'll get into that a little bit more in just a moment but first of all I'd like to talk a little bit about what's happening in the euro dollar at the moment and then I'll get into that in just a moment but first of all I'd like to talk a little bit more about what's happening in the euro dollar at the moment and then I'll get into that in just a moment but first of all I'd like to talk a little bit more about what's happening in the euro dollar at the moment and then I'll get into that in just a moment but first of all I'd like to talk a little bit more about what's happening in the euro dollar at the moment and then I'll get into that a little bit more about what's happening in the euro dollar at the moment and then I'll get into that stand now are very likely to be the RNs Marine Le Pen and the left-leaning, and rabidly so, Mélenchon. I can't remember his party. And this is, you know, scilla and charybdis in terms of the French debt market, one would think. Trying to start send, some are arguing that there could be French discipline around the budget. This is seen as such an obvious issue that they can't dance around it for long. But dance around it all you will, as a French politician, the people in France are of the yellow vest variety often, rather than the, oh, we understand why you're cutting our subsidies on this, that, and the other variety. So this is going to be a critical issue. France has had the luxury of hiding behind the Eurozone, the ECB, and orderly debt markets elsewhere. But France is definitely the basket case of Europe when it comes to the total debt load if you combine. Where the private sector and the public sector are. This was really emphasized in that link I sent a couple of days back to the Russell Napier interview when he talks about France as the basket case, debt-wise, compared to the UK, where, yes, the sovereign debt load looks quite ugly and is a concern, but the private sector is in a far different place. So this is a story that is burning right now, and how bright it burns will be aggravated if global yields are under pressure. Could go away quietly. For a time, if yields ease back lower for a bit, but this is something that is really critical for Europe and, of course, for France specifically, as we look forward to 2027. And German politics could be in play as well, as mentioned. And I'll be talking plenty more about that in coming podcasts for sure. But while on the issue of politics and potentially European politics, a very interesting speech, to say the least, from UK Prime Minister Burnham. I think this was a speech that will be remembered for a long time. You can look at it yourself. I don't want to run through it. I don't have to. It's very late getting the podcast started today, but this very strong signals on the direction that Burnham wants to head at the same time trying to peddle the idea that this will be kept within fiscal bounds. It will be very interesting to see how he does it. So far, the market greeting this with let's just see. There was actually reasonable, sterning firmness here on everything from his you know, talking about sort of not it's not that it is a mass nationalization, but that the public sector will be directing energy policy, water policy, housing policy. And the housing one there sounds a bit more expensive relative to just making sure that the energy companies and electricity companies, power companies are doing what they need to do. Although the UK does have a power price problem that is driven by too much alternative energy in the mix. He sounded like he was taking a pragmatic tone, by the way, on this. And I think that's a good thing. I think that's a good thing. On the source of energy. I think that is key that that that element of pragmatism, I think is really key for whether this has any chance of flying this government and its economic plan. Water is similar thing that doesn't have to cost that much. But the housing is a big cost. And then the really big cost is the promise for this. What is it called the new social care system sort of parallel with and similar to the NHS in the UK, which is about social care for especially the elderly. That's the point that's the, you know, the issue that is so contentious, and so difficult to deal with. There could be some savings to the NHS, NHS from that. But it looks like a budget buster from where I'm sitting. So how he signals what will who will pay for this will be really critical from here. I'll probably have more to say on this as it impacts the market if it impacts the market so far, the market absorbing it quite reasonably well. All right, then we have earnings, as we've been talking about all week. is up today. Really critical stuff, I think, for the hardware space in AI. And on that note, there's a cool link that FT Alphaville sent along on how you value Micron. A very difficult task. I mean, here you have a company that is, you know, its profits have been growing by just unbelievable leaps and bounds. Current quarterly run rate is on the order of $33 billion in operating income. That's more than half of what NVIDIA does. And you have a Micron that's valued, and its growth rates are far, far faster, and yet it's valued at less than a quarter of NVIDIA's $5.x trillion market cap term. So really curious. The forward P's are very low, but obviously the discount here is due to the idea that at some point, you know, the memory cycle and purchasing cycle and demand cycle is very cyclical. So suddenly, in a few years or less, either growth rates are tanking or even in full retreat, and there could even be what Micron has seen plenty of in the past unprofitable quarter. So that this incredible profit growth could be just a temporary phenomenon. At least that's what the forward P is telling you. And then there's, this was recorded some days ago, but the part two of the Michael Every interview, super interesting. And I think one thing that I haven't really talked about in terms of the narrative surrounding this. So it's easy to look at the scale of AI-linked capping. And I think it's really important to look at the scale of AI-linked capping. And I think to shake your head at this and say, you know, how are we going to create these enormous new businesses that are going to throw off these, you know, enormous amounts of profits that would justify all this spending? And why are these participants in this build out participating so enthusiastically in it? And one answer could be that this is seen as sort of a Manhattan project. Who knows, maybe even there are parts of the public sector, the Trump administration, otherwise that are giving assurances like, look, we'll cover you on the other side of this. But for now, this is an existential race with China. If there is something called artificial general intelligence, we can't afford to not get there before the Chinese. Therefore, we need to throw everything at it. And if the, by the way, if the private sector is doing it anyway, all the merrier because the public sector can't really afford it, except to maybe offer some kind of maybe vague, you know, moral hazard guarantees to, to, you know, to look at things on the other side of this, or to protect, protect the U S market from China. Who knows what, these are just ideas I'm throwing out in the air. I think the general message though, is that it is a rush, a Manhattan project towards AGI. And then you have to ask the question, well, what if there is no AGI? What if artificial intelligence is just an amazing productivity tool that can be used in all kinds of ways, as in many envision already, making it easier on everything from a personal assistant level to get your life, make your life more easy to, to navigate with, with AI tools to businesses, optimizing their production and their distribution chains to everything else under the sun. But that is just a tool and a great productivity tool, but not some source of recursively growing exponentially exponentially recursively growing intelligence that will just quickly and vastly outpace what humanity is capable of on a general level. That is my hope actually, because I think it's kind of, it's kind of creepy to think that AGI will exist one day and we'll do all these things that the, the AI boosters, if you will think it will, it will do. But it does tell you that there, if that AGI race is the key component here, not the idea that we're going to build profit and we need to build some kind of monopoly before the others can build a monopoly, but merely that there is an existential race that we must win to AGI. That in itself is a warning to where market values are right now. If this, AGI is not achieved over whatever that timeframe is. So that'll be my riff of the day. If you will, my thinker of the day, hopefully you find that interesting. They discuss it in a bit more cogent way, uh, for sure on the, um, the macro voices podcast, Michael every part two, I will put that link in the podcast episode description as well. And that wraps out today's wraps off today's, uh, Saxo market call, uh, market seem a bit quiet here. I don't know if this is misleading, because of quarter end, because oil prices have kind of lost momentum. They're just chopping around aimlessly. The market's looking for a fresh catalyst waiting until Friday, who knows, but I think, uh, there's a lot more volatility potential out there than this slightly quiet day or a couple of days here has suggested. So stay careful out there and I'll be back tomorrow with the next Saxo market call. Thank you.