Speaker 1Welcome 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 Friday, 16th of October, 2026 and quite a comeback day for Risk Sentiment where we really started in an ugly place with many of the high momentum trades. I'll get to all that later. First, I want to get to the oil market because of an interesting conversation I had with you, Ole Hansen. You're our head of commodities strategy here at Saxo and you were referring to in our morning call to an interview, was it Goldman Sachs' Jeff Curry? Yeah, former Goldman Sachs. Former Goldman Sachs, sorry, their commodity strategist, talking about the Brent contract and how kind of useless it is. You've already made the point so many times that really it's not necessarily the crude oil price that is the key problem here. It's those refined products because of the refinery shutdowns across parts of the Middle East. That's what people actually, of course, put in their tank and that is what is one of the key inflation drivers here. Run through why Jeff Curry would say something like, well, this Brent contract is essentially useless. I've got some interesting, I think, spot versus future prices to run down after that.
Speaker 2Yeah, basically the problem with the Brent compared to WTI is that Brent is a cash settled contract. That basically means it's never going to touch a barrel of oil. It will be, it settles. And so it's really only, it's a paper contract that represents the biggest oil market in the
Speaker 1world. And so many grades of crude benchmark too when they're actually being delivered, but you're talking about a paper contract.
Speaker 2Indeed. So it's, its importance is huge because it is generally the one that is being used by producers and hedges and what have you to kind of manage their flows. And when you feel that a price is not really reflecting what's happening in the physical world, then you have a problem. And I think that's basically what he's trying to highlight that Brent right now, this week we're actually heading for, I think, the lowest trading range in Brent for the last three months, even though. I would say tensions remains elevated. We have attacks on ships. We have multiple disruptions around the world. And we also have the high freight cost that's all playing its part. So, so it's, yeah, it's probably quite difficult to read anything into the current price, because at face value, it would kind of say that, well, it's all okay. But digging a little bit deeper, it's most certainly not. The one that struck me the most this week was basically seeing that some refineries are struggling profitability-wise, simply because the only product that they can produce at a profitable margin right now is diesel, whereas the rest is negative. And that looks odd when you have a diesel price at $200 a barrel. And in this case, we should have probably looked at gasoline or something else, which are trading a lot lower. But basically, the spread between where Brent is trading and where these products are trading, we have to take into account that refineries, in order to get that crude, we pay through the nose to get the deliveries. Freight costs are still punitively high, more than $30. You have insurance on top of that. And then just this whole disruption with ship-to-ship transfer, just making a very expensive process. So refineries, the worst thing, the last thing we need right now is refineries actually starting to cut back on production, because ultimately, they are responding to their shareholders. And if they're making a loss-making transaction, they're not going to do it.
Speaker 1But can't they raise the price? I mean, that would ultimately be what they have to do to continue to refine product. They're not going to refine product at a loss unless the government is force majeure making them,
Speaker 2I guess. Well, if they cut production, then price automatically will rise, because at some point, demand will once again exceed supply. So it's just an interesting thing to follow, because you would have thought that the one that's making all the money right now, that's the refineries. Which they are in the U.S. onshore, as we were talking about as well. Exactly, John, because what do they have in the U.S.? They have cheap oil available, WTI trading at, what, 10 bucks below Brent, and that's a feedstock. They also pick it up from Venezuela and from Canada, and they don't have to pay these very, very high transportation costs. So refineries are in the U.S. in the sweet spot.
Speaker 1Elsewhere, they're not. What about the Chinese demand story? So, of course, the big story has been when this Iran war broke out and, you know, the staggering reality suddenly that this, you know, basically all traffic to our moves, at least briefly, was essentially stopped. And even for many months, at much, much reduced levels, and that China came in, or didn't come in, basically, was just completely chopped its import rate as sort of saving the world, some are saying, by doing so, at least for a time. How much have they, you know, have they depleted a third of their reserves, a quarter, a half? What's the reserve situation there? I've been seeing the headlines that they're coming back into the market. You know, how long can this, you know, in other words, what is China adding to the situation here, if anything at all?
Speaker 2Well, they have reduced their stockpiles, but I think that they're still at a very elevated level. So they still have ample ammunition left if they need to, if they needed to. In terms of demand, I think that demand would have been a lot higher if they could actually get the oil, because what China has been benefiting from for a long time is buying cheap, discounted Iranian oil. But what's not getting out of the Strait of Hormuz right now is Iranian oils. Instead, you can buy Saudi oil or UAE oil, but pay $35 on top, because all the ship-to-ship transfers that need to get it out of the Strait before it could actually be loaded onto a tanker outside the Strait of Hormuz. And there's also these increased sanctions on Black Fleet ships, basically meaning that refineries simply are concerned about not getting their deliveries on ships that are above board. Yeah, that's also impacting the demand from refineries in China. So there will be a pent-up demand when and if we see this tension ease.
Speaker 1All right. And I guess, how confident are you of anything when you're looking forward here, looking at the oil price, looking at this ongoing noise level of drone attacks, et cetera? I mean, we have lots of drones. I assume Iran is doing everything it can to disrupt. It's not profoundly disrupting traffic, it appears. Or is it? What are you afraid of? What do you think is going to happen here, or if you have any sense of confidence at all?
Speaker 2Well, I think the main worry is simply that this could escalate once again. We have the mid-term coming up. What happens on the other side of that? Another was, I believe, a third fleet is heading for the region. So the risk that there'll be another blow-up, I think, is the main concern right now. But we've also seen this past couple of weeks, the IAEA has announced the full release of the barrels that they agreed to back in March, the diesel deal last week between Trump and Putin. And you can see all of these, the impact is really limited. So the bottlenecks are still there, and they will take a long time to resolve. And really what ultimately is needed is the full and free flow of oil and fuel out of the Strait of Hormuz. And it doesn't seem like that's going to happen anytime soon.
Speaker 1Well, there was one story, at least Wall Street Journal running with this story, and this may be only according to their sources. I don't know how much of this is true. Something about Zelensky, Ukraine's president, actually being willing to stop the attacks on Russian refineries. And I don't know how quickly Russia can get those refineries operating again. By the way, I don't have any sense of how profound the damage is beyond that they've headlined. I think it would reduce something like half of their output. And apparently the Starlink, this military links or military part of Starlink, that access to that is so critically important for their war effort, that they are actually willing to cut this deal. This is according to Wall Street Journal. That is my understanding. So just a caveat there. But you're saying, I think you've kind of said that this Russian, in the global picture, the Russian supply is not the huge impact here.
Speaker 2Well, it is the marginal difference that really tipped us into these very, very high levels. Because if you look at roughly what has been lost from Russia and Middle East in the last few months, it's roughly two-thirds from the Middle East and one-third from Russia. Okay. So it's the marginal barrel that basically, well, not broke the camel's back, but really just sent prices to these high levels. So again, if we can get some of that supply back, that should ease some of the pressure. But as I said, this week, we are still struggling around $200 a barrel in diesel. And we just saw this week also in the EIA's weekly inventory report, gasoline demand fell as it do this time of year. What rose? Diesel demand, because we're into the high demand season. Wow. So yeah, we need the diesel. And the question is where it's going to come from.
Speaker 1Okay. All right. Thanks, Ole, for the run-through on energy commodities. There's not a whole lot happening in gold and silver. It seems like silver having a comeback somewhat aligned with or correlated with a broader risk sentiment yesterday. And gold is just remaining.
Speaker 2Yeah, gold is stuck. But if you look at the chart, even though I don't really like trend lines that much, I prefer a break of previous highs and lows. But if you look at the chart, we've been in a downtrend now for the past three months. And it just seems like at current levels, just below. low $4,200, we are potentially challenging that downtrend. But I'm really watching the $42.35 area. That was the local low back in September when we broke down. So if we can make it back above that, I think that could probably add some nervousness to recently established shorts, especially those who try to go short on that big CPI print early in the week. That really failed quite spectacularly.
Speaker 1Yeah, and we saw the reversal in Treasures, talked about that yesterday. All right, Super, Ole, thanks for the run-through. And have a great weekend when you get there. And yeah, there's lots going on in the equity market. I'll see if I can get through this in an organized fashion. So as mentioned, we were down very heavily. The NASDAQ was off. It was at 500 points. NASDAQ 100, that is 500-something points at one point. We managed to rally throughout the day and just almost managed to close at break-even, not quite there on the NASDAQ 100. The S&P 500 up three-tenths of a percent-ish. The median stock not doing that great, actually. The S&P 500. The S&P 500 eco-weight was down 0.6%. But I was a bit surprised because I have a handful of holdings that all, and I mean all of them, were up. And most of them were up very, very heavily yesterday. Some were thinly traded materials-related stocks. And I noticed that these were all up, as mentioned. So the small-cap index as well was up quite nicely. And these other types of stocks that I was just talking about, most of them had been sort of steadily down in a pretty ugly fashion in recent couple of weeks. So that turn was just that the internals felt very, very different yesterday for sure. And that overall comeback and the momentum names was critical. And this is the first time I've seen it mentioned. There was on a chat somebody talking about the Goldman Sachs quote-unquote broad AI index. I can't see its members, but I think it would probably be pretty easy to reverse engineer it. This Goldman Sachs broad AI index of equities had punched down through its 200-day moving average. It was an intraday yesterday. And this 200-day moving average was like almost exactly, it actually was exactly touched and I think marginally closed below on one day back in July. And then it recovered in very rapid fashion from that test. And we recovered intraday in the case of yesterday. But this was only after a 15-plus percent slide in that index over the last whatever the recent top was a few weeks ago. And most of that happening in the last handful of days or 10 days or so. This was a key comeback. This was a key focus. This basket of stocks is really critical for overall market sentiment it feels like. Even if, again, if you're hiding off in different sectors that are totally unrelated to AI and have absolutely nothing to do with what those sectors will do, I think for the broader averages, these types of indices and this comeback yesterday was critical. And that sort of low that was established is the critical technical level against which we need to see what we could call a bull bear line essentially from here. It was quite noteworthy, though. There were quite a few of the AI and hardware-related names that had pretty darn ugly days. I didn't see where they were intraday at their worst. But the likes of Dell, Coherent, Applied Materials, LAM Research, STX, which is Seagate, all having pretty ugly closing levels relative to the prior day despite that comeback to almost flat on the NASDAQ 100. A couple of those names are reporting next week, by the way. Not a couple of those names, one of them, LAM Research, is reporting next week. And next week, we are hitting full stride in terms of big names reporting and big mega cap and even mag seven names, two of the latter on Wednesday. So meta, really critical there. You know, what is the noise? What is the guidance around, of course, their whole AI business and their overall underlying business and how it's doing on ads, et cetera. But the whole Muse situation, the AI assistant, and who knows, maybe they're even selling some of these crazy charm devices. Or seeing demand in their channels, whatever, as Meta tries to enter the hardware space to link those devices as well. I'm skeptical on that one. Maybe the Muse itself, but that charm thing is just a wild card there. Tesla also up on Wednesday. And, of course, we can't talk about Tesla without talking about their so-called flying car. It was indeed sort of flagged because they delayed the event because of weather. That clearly had something to do with this thing needing to move through. Through outdoor space. And it's, I mean, how do we, or how do we, how do I position this crazy stunt that was pulled off yesterday? First of all, it's just visually stunning. It's an amazing looking car, unlike the Cybertruck, which is an abomination. This beautiful styling on this roadster, a bit blocky, but that's because it's holding massive air tanks that it is using for various types of both propulsion, and suction. And why suction? That is for the equivalent of downforce, which is usually achieved aerodynamically, but in this case is achieved via a vacuum under the car somehow, which allows, you know, surreal cornering ability, apparently, and allows this crazy stunt. And I'll put a link in the podcast episode description to this video. I'm sure you've all seen it anyway. But where it goes up a ramp and essentially goes beyond vertical, but still stays stuck to the road, comes back down, and then does the incest. Insane thing where it flips around and lands based on this compressed air propulsion. It's totally useless, though, is my takeaway, my view. This is a stunt you can, you know, show your billionaire bro friends and do, and, you know, won't be road legal to do such things. I would imagine you can only do this in sort of a, you know, safe, hopefully a safe off-public-roads stunt, these little flying efforts. And then I was, you know, trying to dig around, getting ChatGPT to do a little research, and it estimates that we're talking about a quote-unquote flying time of just a few seconds from these air tanks. You know, just the basic physics of how much air would have to be propelled out of these tanks and how much energy it would take to provide the compression to fill the tanks suggests that you're getting just seconds of flying time. You know, that demonstration may have exhausted most of whatever air that vehicle could hold. And it would, you know, cost on the, you know, estimated by ChatGPT, I'm assuming they're using some physics, and I believe they're, I believe the basic calculations in approximate terms, because it is a hell of a lot of energy. You need to propel something to actually, you know, move tons off the ground. 30 kilowatt hours. So that's the equivalent of, you know, I have an old EV that has a 40-plus kilowatt-hour battery, and you're essentially using the entire battery for just seconds. as a sort of coincident indication to the comeback in risk sentiment. We saw core weave bonds. The CDS price is coming down slightly. Same for Oracle and other of these shakier bonds out there. Overall, Bloomberg high yield index was also slightly lower. But yeah, I wouldn't exactly call this a massive comeback just yet. So we need to continue to focus on the credit conditions and the risk of deterioration of key names as something that's something that breaks somewhere in this as a risk as long as these prices are as elevated as they are. Oh, by the way, on core weave, so their CDS prices are astronomically high, suggesting very high risk of an incoming default and restructuring of their debt being needed. There was a headline, at least I saw, of the three, I guess there were at least three co-founders or early shareholders having been cashing out in quite heavy fashion at far above the current market price. So, you know, the accusation could be that somebody like these co-founders were just gunning the growth rates as much as possible to show impressive growth so that they could get out before the bill came due for all of the debt that is being created as a function of that capital expenditure bill. I didn't mention all of the earnings coming up next week. Do have a look at our quick takes on the platform. Or on the homepage. But Tuesday, GE Aerospace, Netflix, RTX, and GM. And then we have on Wednesday, as mentioned already, Meta and Tesla, Lamb Research, Texas Instruments, and IBM. So quite a heavy day there on Wednesday. And then Thursday, slowing down a bit. And this is just highlights of highlights. There are many other names and even some of the names I'm throwing out here. It could be inaccurate. I'm just, it was one data source I used and occasionally some of these names end up reporting on a different day. So always check. These yourself. Thursday, Procter & Gamble and Western Digital. So the hard drive maker that has, you know, been on much harder times relative to the huge ramp earlier this year. Also worth noting, I didn't mention it at the top and I should have on the overall performance of the indices. I was trying to find some color around some of these internal divergences and so on. We saw, I found some of these Goldman Sachs indices. There's one called Hedge Fund VIP, which sort of. Takes the stocks that are most represented or most commonly appearing in the big hedge funds. And that looks to me, if I overlay it with the, this so-called broad AI index, also maintained by Goldman Sachs, a very, very similar performance. So that says to me, the hedge funds are really heavily into these key broad AI names. But then a bit more interesting perhaps are two things. So there's this most shorted Goldman Sachs index. So it, when this goes, up, that means these short positions are suffering. It was up 3.1% yesterday. So the, one of the better performing areas of the market was, were those stocks deemed worth most worth shorting in the hedge fund space. And then there was a, even a via a very important short positions. I guess these are the heavily shorted in terms of overall market cap was, you know, up slightly. But I guess the more interesting thing with this one is that this overall index started this year, at four, a price of 440, and it's not at a new high here locally, but it is currently at 551. So very important short positions are really not helping out their portfolios, maybe in relative terms, but they have to have an awfully good performance from their longs to be working against essentially a 25%, a negative for their short positions. And then rounding out, and I'm sorry, a bit all over the place. I went through the U S data that didn't talk about the rate reaction, which was pretty tepid. We sort of bottomed out in yields and we've come back up a little bit, a bit curiously, the October odds, uh, October FOMC, what is it on the 28th? I believe the meeting later this month, um, are down at only 13% for a rate move. For some reason, this speech by Kevin Worsh, uh, there was some conference and I was in Bangkok and Thailand. He really didn't mention it. Didn't want to mention anything about, uh, any observations on the rate, uh, or of course, forward guidance. Uh, he talked a lot about AI and how important it was. Maybe some people reading into that, that he thinks it's going to be amazing for, uh, amazing for, um, uh, productivity. I don't know. I didn't see much in this, but there are a lot of headlines shouting that they think his, uh, rhetoric contributed to the lower odds of an October move. I do remember it is coming just days before, and I mean, just days before the following Tuesdays, um, midterm elections would be quite a cheeky move for a worship. Fed to hike the rates and feel the fun of Trump's ire, no doubt, if he did so. And then in terms of Forex, so we have in Eurodollar, we see that, you know, the dollar is trying to get a little bit weaker here. 1.1240 was his key line in the sand over the last week plus. It's been touched on a few occasions. We've kind of slipped above that at times here this morning, but it's not exactly showing any impulsive behavior. I'm not sure what we're waiting for. It is a Friday, what my mentor in the old days called Amateur Day, which meant it's really lousy to trade Forex on a Friday, basically. And dollar-yen is just not really sending any clear signals. Again, I was spooked yesterday, as I mentioned, by the fact that it didn't trade lower still on the rate reaction to the CPI print. A bit more sort of clear signals in other dollar pairs. So cable is up decently above 1.33. So sterling versus the dollar as Eurosterling. Makes new lows. And Aussie has managed to recover, even though it's quite weak, versus the Kiwi. So the Kiwi has really posted a significant recovery. And dollar-Swiss is also coming in a bit lower. And then out in these sort of the other crosses, Swedish Krona really making waves in further affirming of the Swedish Krona versus the Euro. Down at 11.13. That's been quite a move off the 11, what was it, 30-something high just two, three weeks ago, I guess it was. If it punches down through around 11.10, it's starting to look like a full-on reversal that could take out, or at least challenge, the 11 level. So my wife working over in Sweden, that's a very nice thing for me, for the Swedish Krona coming back into Denmark. All right, that is a wrap, except for a couple of things I will highlight in, actually, a couple of news stories. So I'll just highlight the headlines, and you can Google them yourself if you'd like to follow up on those. But I also have a couple of other links for the podcast episode description. By the way, I mentioned on the podcast yesterday. This is a lot of news. This is a link to this Dark Matter story, super interesting for the astronomy nerds out there. And I forgot to put the link in when I initially uploaded the podcast, but I did add it there. So just consult yesterday's podcast episode description if that is of interest. Again, the Tesla flying car thing, I will put that link in there. A very interesting thing that crossed my headlines collections yesterday was this top concern by U.S. voters is what? Is it inflation? Is it health care? Is it health care? Nope. It's corruption. And if corruption is the top concern, I think I know the guy at the top that could be the top of the top of concerns out there. So this would suggest to me that the Republicans are in for a particularly large drubbing unless people feel that this corruption is, and I'm sure the Republicans base, MAGA base, thinks that the other side is corrupt and vice versa. We all know this partisan skew. But still, I would suggest that 90% for a broad. Broad reading is really remarkable. And then there was an interesting one, and it's a Robert Pape. So he's kind of proven directionally right in some ways about the course of the Iran war. I sent a link to some of his stuff in a long conversation of his some months back. He's a bit maximalist on his view that Iran is sort of controlling the escalation dominance and all that. But whatever the case is, I think it's interesting what he brings up in a post that I believe is available. For everyone, not a part of his paid service on support for political violence. And it's up very heavily on both sides of the aisle since September of last year. This is this is kind of scary to me. And it's just something I thought I'd put out there, something we need to track how deep this part of and serious this partisanship is in the US. And then just on the headlines, there is Indonesia. It's risking the MSCI downgrading it from its emerging market. They're concerned about, you know, essentially the how how the governorship governance, I should say, of the market is in terms of insiders, manipulation, all this kind of stuff. So Indonesia was down over 11 percent in the session overnight, despite most indices being in the green elsewhere. So that EM status in jeopardy. I don't imagine many of you have Indonesian stocks, but if you're wondering what's happening, that's what's going on there. I saw this headline. Super interesting. Taiwan considering chip export controls to China. In line with US demands. Wow. I thought Taiwan was supposed to be part of China. Super interesting on that front. Of course, the highest end chips are produced at TSMC, in many cases in Taiwan. So that has to be where it happens. If the US is to have any control over where these chips end up, even though it is US companies, they are produced largely in Taiwan, at least for now. And then there is somewhat related to that. You see this headline, I believe it was on Bloomberg, that the EU is looking. At additional sectors for Chinese trade quotas. So we have a potential for this. All while, of course, China just reported one of its blowout trade surpluses ever. You can't make it up, but the noise level on the EU trying to control the flood of goods coming in from China seems to be picking up here. All right. It's been a long one. I think I'll cut it off there. I will not be here on Monday for a podcast. I'm taking the Monday off for an extended weekend, but I should be back for the podcast on Tuesday next week. In the meantime, stay careful out there. Have a wonderful weekend when you get there. And I'll be back next week with the next Saxo Market Call. This has been the Saxo 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 marketcall at saxobank.com. That's marketcall at saxobank.com. Saxo. Serious trading worldwide. We'll see you next week.
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