Geopolitics could continue to dog this market for a long while yet.

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 Friday, 25th of September, 2026, and we have markets that are finding an even keel, at least the equity market. If you look at the top line averages, pretty much unchanged on the day. We were down pretty bad on this latest pump in oil prices and, of course, also global bond yields, although the front end of the U.S. yield curve managed to steady a bit there. We got you in the studio today, Ole Hansen, our head of commodity strategy, and we saw an even further pump higher. We've come back a little bit here. Ron's saying it's ready to make a deal if the U.S. promises to end this naval blockade. We don't know what the other terms are. Chitter-chatter about them wanting to sit down for new deal-making. I just don't see it happening, but maybe we get some kind of quiet here. What is your take here on what to look for from this situation that just never seems to end? Well, looking at the Brent crude price, which is heading for small weekly declines, trading around 106. It's still, well, obviously, then above 100. Basically indicating, I would say, the market's really been left none the wiser. We've had some positive news on the supply side. The East-West pipeline inside Arabia is reopening. We got tanker tracking data pointing to a reasonably robust flow of fluid crude leaving the Strait of Hormuz. So that's obviously should be weighing on prices. But at the same time, we've had all these sound bites from both sides during the week, again, threatening with total destruction to where the talks are going swimmingly. So we're basically none the wiser, I would say. Iran has got some demands, and the question is really whether the U.S. is prepared to accept those. And I think probably also they feel they may just gaining the upper hand because crude is flowing out, but at the same time, there's no fluid crude coming from the Iranian side. So we'll see. Hopefully, we get some kind of solution soon. But we've seen these escalations successful from the Iranian point of view when you had that East-West damage. pipeline damage in the first place, a couple of tankers being struck here and there. You just wonder, you know, I would take fairly seriously the threat that something could happen again if the naval blockade is not lifted. And I can't recommend enough. I listened to the first part of this this morning. There's another interview with Michael Every, the Rabobank strategist. It's a little bit more specific, I would say, than he often does on the whole geopolitical risk here. And his position is that, look, no matter what, you know, we can argue about maybe from the U.S. point of view, they might even pretend to do some diplomacy here with Iran in the very, very short term just to avoid the worst carnage into the midterm elections. But he sees the risk. And I'm actually just a little more sympathetic to this view with being a bit lazy in my thinking recently, I think. His view is that the risk is of an escalation. And I think just big picture, it just feels like to me, the global, the other powers in the region, the U.S., Israel and others, see this. As an existential situation, this Iranian regime must go. And then his position is that Michael Every's, that is, that we would likely see in such an event of a new round of hostilities against Iran to do some kind of regime change or more profound operation against them. It would involve more of the regional powers as well. An interesting position. I don't know if he's right. I just think he has some compelling arguments in favor of this. So that's I think it's a risk certainly for there. And he also argues that the U.S. is not going to be able to do anything about it. And I think that's a risk certainly for there. And he also argues that the Ukraine-Russia situation could risk escalating as well. So I mean, these are these are some big ifs. If any of this comes to light in the coming months here, this is going to be a dark winter. or Trump favoring an export ban, but then the industry basically rolling back on that, saying that that could have a short-term positive impact on lower price in the U.S., but potentially a longer-term damaging effect. So we're not on the wise on that front. So I think we're leaving this week behind with fuel prices still at punitively high levels that raises concerns about inflation that obviously translate into the surge we've seen in bond yields and what does that do to fiscal debt. So, yeah, a lot of different things coming from this energy crisis, which, yeah, by no means seems like it's over yet. And he does some scenario analysis, by the way, in that every interview, which, again, I've only heard the first part of it, around that specific issue. Well, what if the U.S. does embargo diesel? What does that mean actually for, for example, Europe and Ukraine? Because it was Trump warning Ukraine against attacking Russia's refining capacity Ukraine essentially just went ahead and did another attack anyway. But then there would be Europe suddenly saying, hey, back off, Zelensky, we need to have some diesel as well. There's all kinds of knock-on effects from all of this. And I don't think we're, it's really hard to get a picture on the longer-term price here for energy. Absolutely. And we just have to look at the trading range in Brent this week. It's more than $10. So this kind of volatility is going to stick around for a while until we get some. some solid, solid information, and that's, that's not sure. I'm not, I think that can still potentially last quite a, quite a long time. Yeah. What about the forward price? If you look a year forward, has that made any serious adjustment? Is the market concerned about anything drawn out? Do we still see this just tremendous backwardation in the forward curve? It is very backwardated, just, just simply from the fact that when we, when the spot price is trading 20 above the November Brent future, which is the one we, we, everyone is watching, then, then it continuously, it continues. It continues to fall further out. But as long as it, it, it drags on, the, the, the back end will probably receive a small, small boost at the same time. The longer this drags on, the more the demand destruction we're going to see. And the question is really how much of that demand destruction will, will return when we eventually have a reopening. We're seeing that in, in China right now, where they are, the, the, the push towards electrification has, has increased dramatically. Unfortunately, you can say, well, that power is great from a electric from a energy transition perspective. The problem with that is that power is being produced by coal and we're seeing that in Europe as well, that the demand for coal is going to, or the usage of coal is going to increase in the coming months, simply because gas prices are as expensive as they are right now. So, so we'll see the, the level of ultimate demand destruction from this crisis will probably determine where we, where the prices will be in, in, when we eventually normalize it. But there, there's a very, very steep backwardation and that's still adding to the, to the underlying, um, returns you get by, by being longer. So as long as the market stays relatively elevated, uh, the, with that future role, the, that there's a, a big positive role yield baked into the price. Unchanged price would mean tremendous profits if one were to trade that forward world, uh, and, and, and forward, uh, yield, uh, sorry, forward price curve. Indeed. Indeed. All right. Over to natural gas. Uh, suddenly, uh, you know, I'm always banging on about, uh, the US natural gas being insanely cheap. It's still very insanely cheap, uh, arguably relative to what the rest of the world pays for it. But we got a huge spike yesterday. What is this all about? Uh, this, this big price spike in the US, is the LNG market tightening, uh, or what's going on here? No, actually it was, it was a disruption. It was, um, and I can't pronounce it, Appalap, Appalachia, Appalachia, Appalachia is the, uh, yeah, the, the mountain chain, uh, on the east side, eastman side of the US. Yeah. Basically, um, a massive production site for US, uh, natural gas. It was a pipeline disruption, which, uh, basically supplies. It supplies around 1.6% of, uh, US, uh, gas, uh, pipeline gas. And that, uh, was enough to send prices, uh, sharply higher. At the same time, weekly inventory levels, uh, which are released every Thursday, um, US, uh, uh, yeah, after morning US time, indicated that, uh, or showed that for, uh, I believe a fifth or sixth consecutive week, the, uh, build ahead of the winter period was weaker than it had been on a five-year annual basis, so basically the, the, the surplus relatively to the long-term average. Uh, in terms of gas supplies in the US, it's coming down, it's now down to around, uh, less than 3%. It was more than, I think it was close to 10%, uh, a few months ago. So that's also, um, supporting the price. So this was actually a odd week where US gas and European gas actually went in different directions. And it went different directions. But, but, and for a change, they actually narrowed, uh, US gas rising and European gas prices falling, um, because with the, uh, increased flow, there was a few ships coming out of, uh, the Strait of Hormuz. From, uh, LNG ships from Qatar, that's also just, uh, alleviates some of the, uh, some of the stress. But, uh, so for a change, uh, a, a, a bit of a narrowing in this massive price spread between the two gas. Right. And then we have 70% plus now, uh, storage full in the EU. But I'm wondering with this El Niño, whether we're going to get a very mild winter. Certainly in this little corner of Europe, the temperatures are absurdly, uh, mild. I think the forecast for, uh, next middle, next week is going to be for a 19 degree high here in Denmark, which is just, must be getting near a record. But, um, this El Niño, uh, indicator, by the way, did hit that three degree mark. That is so we were at the record high. about two months before seasonally it's supposed to peak. So we could peak as high as four degrees above what is normal for this key area of the Pacific. Back in 2015, I believe, I didn't know the year. Yeah, 2015, the temperature curve at this point on the calendar was only two degrees. So we're a full degree above the record year. Pretty remarkable stuff. I guess there's a lot of talk about it more than major impacts now, or are we already seeing some weather impacts? Well, we saw the market probably jump the gun a bit in something like sugar, which really rallied very strongly back in July and August. It's currently still up around 18% year-to-date, but has come down quite a bit. Elsewhere, there's not really too much stress to be detected. Cocoa prices are still down a year, up this week. And then we've got. We've got something in orange juice, which has actually recovered quite a bit this week, up 7%. I don't know whether that's. Big juice traders, beware. Exactly. I don't know whether it relates to that. And then we've got some. We've got very wet conditions in the U.S. Midwest, which potentially could be part of this as well. And that's actually delaying the harvest of soybeans. And that's why something. One of the high flies this week has been soybean meal. It's up 4%, 25% gain year-to-date. And that's really interesting because if you look at the. I actually didn't focus on last Monday, but I should have done because if you look at the speculative interest in soybean meal, it's absolutely surged high in the last six weeks to a record high to the extent that the net long held by speculators in the soybean meal market is basically now one-third of U.S. total production, annual production. So just be aware a little bit that this kind of position needs to be fed good news in order to be maintained. So if we suddenly see weather conditions improve, drying up, and the. harvest picking up pace, there could potentially be some trouble in that price action. All right. And then not really much to talk about elsewhere in the commodities market. A little bit on gold here. I mean, we've been testing a little bit lower. We haven't quite tested that recent low, but I guess the story remains gold just looks quite resilient given the backdrop, higher yields, higher dollar, all this stuff. Yeah. We just have to look at what happened this week. We had long-end yields up, what, 17, 18 basis points. We got the dollar up by 1%. So this really has been a week. Another week where the gold and the precious metal market gone through a bit of a stress test. And again, gold is down, what, 2.5% on a week. So I think that's relatively a good performance relative to what else is going on. The real yield, the 10-year 10-year basically hit, it wasn't a record high, but it was at least a 20-year high. Well, 30-year hit the highest since 2004 was the headline. Yeah. I don't think. I don't think the 10-year is not quite there yet, but the 30-year did, yeah. Yeah. So we're up there and gold is holding. The 42.35 area, I believe, is the recent low. So we didn't get quite down there this week. So far, demand is still. Underlying demand still seems to be robust. ETF holdings have not seen any. Suffering any major setbacks this week. So, yeah, I think it's still all to play for. I see. I'm not really seeing any. Any major shift towards a negative focus on gold, simply because the higher the yield goes, the potential more support you could see for asset that sits outside the financial system. All right. Thanks, Ola, for the update across the commodities space. We'll see how it shapes up. I think it feels kind of pivotal for gold there around this recent support levels. And, yeah. All right. Let's wind back a little bit to a couple other areas. Again, as indicated, the overall indices in the U.S. closing around unchanged, plus money. Minus around zero after being quite down intraday. But if you look at the broader S&P 500 equal weight, it was a pretty ugly day for the median stock out there. Minus 0.67%. Only 175 gainers, or 176 gainers, I should say, on the day around 325. Therefore, either breaking even or with a minus on the day. So, and I think it's kind of interesting. You look across, you know, away from tech. It's like a successful growing company like Costco, which reported. Another strong earnings report, from what I understand, reading the headlines. And you look into the price action in that stock, and it's down almost 20% from its highs for the cycle. But, you know, these big companies that are sort of steady growers and they're heavy in various indices have gotten just tremendous valuations. I covered Walmart sometime back. I covered AutoZone was another one. It's also suffered quite a price correction without any dramatic change, really, in their financial outlook that I could, the last time I investigated it, anyway. And Costco is quite different. I mean, AutoZone is one of the, you know, the ultimate examples of playing the whole buyback strategy. It's a number of shares that are in the flow. It's just dropped tremendously over the years. Costco is not a big, is not a buybacker. So, their outstanding shares, floating shares are steady. So, interesting to see, again, despite that steady growth, that it has been marked down. It's multiples have been marked down. Of course, some of that is obviously on the rise in global yields. You would think that makes sense. But it's still at nosebleed valuations. $400 billion market cap for a company that's making less than $10 billion in earnings at the moment. And growing, let's say, best case, around 10% per year. Again, no buybacks. And the free cash flow is well below that $10 billion, by the way. That's nosebleed stuff if you look at where you can get on a, for example, on a U.S. 10-year treasury. All right. So, what do we have? Oracle was an interesting one. It was down quite heavily. There's this news about, the details are a bit hazy to me, but some kind of huge data center in New Mexico and the idea that even if there's a risk that there's no power hookups for this large data center, and even if that is the case, that Oracle will have to pay off or continue to pay as if the data center is in operation. So, some concern there. If you look at with this latest rise in yields, you're also seeing a lot of people saying, a lot of these private equity names linked to heavy data center debt under a lot of pressure. You know, Blue Owl being one of those that's getting near, I think it's lows for stretching back quite some time. More positive news, we had Meta with another banner a day, extending to new local highs there. Again, all the fuss around this Muse app. I was actually thinking, I struggle with a lot of these user cases, and maybe we need to think through some of these user cases to see how compelling some of the articles are. I don't know what the arguments are for things like this Muse and the Muse charm or whatever. But one of the areas that causes me a heck of a lot of frustration is I was looking at some kind of application for something, and it needs a passport photo. And you know, you've put a passport photo in various places on your phone, in your gallery, maybe stored on your computer somewhere, and it's just bloody annoying trying to dig it up. So, it's almost easier to go upstairs and find the passport, dig it out, take a new picture than it is to fiddle around. It would be nice to have your AI assistant say, hey, give me that, find that passport picture or find that document. And you could have actually a habit of whenever you see anything, you just take a picture of it, maybe do a voice prompt, or the AI app reads what's on that document, files it away for you, and then you can just reference it verbally. Say, hey, remember that thing that I saw here? And it can all do the retrieval, save you a lot of time with this kind of thing. Anyway, sorry for the riff there. I'm just thinking, I'm trying to think of useful, useful usage cases for these AI personal assistants. And I'm sure there are more than my middle-aged brain is capable of conceiving of, but I can think of a couple. Anyway, the meta was up decently strongly on the day. Also positive, we had a huge boost to Akamai shares after hours. I don't even remember who, but there's a takeover offer there in play, up 20 plus percent. And we noted that recent big boost off of the, or big rally from below the 200-day moving average. And actually, ironically, the shares were down quite heavily yesterday before this after hours announcement. Okay, we're late in the quarter here. So the earning season is very, very slow in terms of the reports before we start gearing up in October. But we do have two interesting companies, one very interesting one reporting next week, and that is Micron, of course, one of the superhero risers of the year on the AI data center hardware. Phenomenon, and it's general heavy needs for memory into all the compute needs for AI inference, et cetera. Super curious to hear what they have to say and how the market treats that report next week. It's a $1.2 trillion company, keep in mind. And then on Thursday, we have Nike. It's just unbelievable suffering for shareholders there. We're down on the order of 80% from those highs when its business model seemed to be particularly successful and it saw a nice ramp post, you know, break of the pandemic. And now everything is just compounding in the wrong direction. They really need to show some signs of green shoots or ability to grow again. Otherwise, they're starting to get priced as a stagnating company. And then where it's all at besides the energy front, Ed is on the bond yield front. Things have gotten a little bit quiet. We extended higher in yields. There was a steepening of the yield curve in the U.S. Again, the two-year treasury yield didn't quite break the intraday highs from the previous day, and we settled a little bit lower coming into today, but still around 40%. 4.9%, as I argue in my effect piece from this morning. It feels hard for the market to price in significantly more from the Fed here. I mean, we're priced at plus 87 basis points through next June's FOMC meeting, and you're getting closer to 100 basis points the further out you go. Are we really going to see the Fed going there before something breaks in terms of confidence in the bond market or otherwise? It's just getting a bit tough. I think the bar is quite high here for these further sharp gains at the front end of the curve. So any further sort of aggravated rise in yields would have to come from longer yields. And there, of course, the U.S. Treasury is restraining supply to a degree. Keep in mind, we're coming up into quarter end here at the end of September, which is next Wednesday is the last day of the month. Could be some rebalancing if you mark to market your bond holdings and if people are maintaining a persistent or consistent exposure to bonds. There might be a line circulating next week. But yeah, so that's my feeling at the front end of the yield curve. Of course, we need to watch the long grand. We saw 5.5% almost trading the round level for the 30-year yesterday, and we reached 5.2 on the 10-year. So again, already at these yield levels, feels like this is a strong headwind for equity markets. I was surprised that we managed to scrape back to a break-even from the main indices yesterday. We saw a new home sales figure from the U.S. yesterday at an eight-month high. Quite a bit of a surprise there. And then we look forward to next week. I think the interesting thing there is, of course, the jobs report on Friday, but maybe a bit more sensitivity on the ISMs because let's remember this big recent, most recent surge in yields was kicked off by that S&P Global preliminary flash, I should say, flash PMI reading for September. And if these are not confirmed by the ISMs, there's a bit of a data mismatch there, but we'll see. Of course, the ISM manufacturers on the first day of the month, so next Thursday, the day ahead of the jobs report, and we get other jobs data leading up into that ADP, et cetera. The ISM services is not until Monday the 5th, so not for another week plus from here. And then we do have, of course, the jobs data is important. Of course, if it's another strong number, it starts to look like a pattern after the S&P 500. So we're going to have to wait and see what happens after the somewhat firm August report. But the key here is oil prices, A, and B, other signs of that feeding through to inflation. Obviously, labor markets data will be taken more seriously if it's suggesting the risk of an inflationary component coming from there. But I guess the bigger impact surprise-wise, barring a massively positive number would be a very ugly number that sort of looks the wrong way around relative to where yields have gone from here. All right. That leads me to a couple of links for today. And some of these I have not read myself, but they definitely look interesting and something I need to follow up on. The first one is that Macro Voices podcast with Michael Every once again. Again, a lot more granularity and detail on some of the things he's talking about rather than this huge backdrop of this massive macro strategic blah, blah, blah, which is still super interesting, but it's just a bit more interesting when you get more compelling to think about things when they're down to the ground level, what's going on right now. Then there's my FX trader piece from today. There's an FP, FT, I should say, big piece on quantum. I guess it's a category of articles that they're running, moonshot capitalism. Interesting, is this ever going to find some kind of economic useful application that means something for these companies, the ability to turn a profit from all of this? I haven't actually even looked at where these quantum stocks are recently. Maybe I'll bookmark the need to do so. There's that one. Then there's two more. There's one I just recommend from the title, haven't even read it, but the title from an FT Alphaville article, SpaceX pivots away from space. Really? That's an interesting one there. Then there's something I'd not even heard of, but apparently is going crazy among software developers. That is this TypeSafe AI, which has released a new AI model, basically really geared towards software developers. It's called Dev, as in like dev, but with a J, where there's something like 40 million people watched its launched video on X. Something to track there. The risk here, of course, with all this circular financing of these massive companies, OpenAI and Anthropic, is the risk of disruption coming from all angles. That would be one of the reasons this is a very interesting story potentially. FT Alphaville is FT in any case. The title being the UK and Germany are among those nations most exposed to China. Just reminding us of how still at this phase, these companies are neck deep in their economic integration and reliant on components and materials and all kinds of things from China. It's rather funny that while the headline touts the UK and Germany, Germany actually being higher than the UK in terms of its overall exposure, the US is way up there too. Higher in the UK, but slightly below Germany's exposure to the Chinese economy. Maybe makes a little bit more sense why you see, is it just for vanity that Trump flatters Xi and he admires the strongman, or is it just to try to keep things friendly? What I'm referring to here is the optics of the big Xi presence there in Washington and rolling off the red carpet. Is it to keep things as good as it's supposed to be, or is it just to keep things as good as it should be? I don't know. I'm just realizing that the US is existentially threatened until it can get itself, you know, unentwined from this supply chain exposure to China and all kinds of areas. Don't know. And I think 2027 will be a lot about figuring out the answer to that question now that we've got this two-month punt beyond the end of the November expiry of the prior arrangement on trade, etc. All right. On that thought, stay tuned for those links. And I'll see you next time. Thanks. And the podcast episode description. Stay super careful out there. I think it's going to be a very interesting week ahead for energy prices and bond yields and the markets, broadly speaking. Have a great weekend when you get there. And we'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 saxomarketcall.com. And we'll see you next time. at saxobank.com. That's marketcall at saxobank.com. Saxo. Serious trading worldwide. Thank you.