Have we entered the event horizon for a volatility spike?

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 Wednesday, 2nd of September, 2026. Apologies for you getting such a late start to the podcast today for those looking for the normal release time. But felt like with what's going on in the market, I need to get one out today regardless. So what do we have here? Well, I think one of the prime movers is the energy market. We have with U.S. strikes on basically Iran, who they say is trying to lay sea mines in the Strait of Hormuz and I guess against facilities meant to launch missiles and drones, etc. That has aggravated the oil price rise once again. And we saw a new highs trading. We were all the way up to $97 a barrel for the front Brent contract. It dropped back to $95 and WTI even hitting around $92 before falling back a bit. And as we've emphasized or as Ola has emphasized here on the podcast, it's not just that price of crude, it is the price of the refined products. And diesel is especially a bad pinch point. Diesel refining capacity is constrained. Refined products are not getting as much as they should be. So we're going to talk a little bit about that. We're getting out of the Strait of Hormuz. We all know the Russian energy situation, refinery situation because of Ukrainian attacks. And so diesel markets have tightened to an unbelievable degree. Apparently, we've been hitting towards $200 a barrel for diesels. Now, normally a decent markup would be on the order of quite solid profit line to very good would be 20% on a basic price of crude oil versus diesel. In other words, a 20% premium for the diesel. We're at 100% plus. We're at 100% plus premium here at these levels. That's going to start shutting down demand. You have to imagine in all kinds of places. It's a big input cost for trucking, obviously, but all manner of economic activity. So that's one of the key focus points here. And in fact, I'll put a link to Ola's article today. He's talking about even looking back at five-year returns, we're getting return levels for some of these major energy companies that is rivaling AI type of returns. And just to tell you a little bit more about that, I'm going to put a link to Ola's article today. I'm going to take one example I picked out today, Valero. I'm talking about a refiner. They are a big refining company. They are up over 120% year to date. There's not even that many chip companies that are up that much this year. So just to point out where we are with oil and as a key driver of what else yields and those yields hitting new highs. And it's gotten very spicy, the action at the front end of the curve in Japan, where there was no oil, there's not even that many chip companies that are up that much this year. And it's gotten very spicy, the action at the front end of the curve in Japan, where there's not even that many chip companies that are up that much this year. next week's official CPI data point, it is the one that comes out first for the prior month. And it's created by the BLS. And that's one data series. And the Fed traditionally has focused more on the PCE. But in Warsh's speech, he emphasizes more headline inflation rather than core inflation. So going completely against Fed orthodoxy since forever, which is more than a bit odd. And as well, sort of being more dismissive than one should be, one would think, of the inflation impulse coming from wage price setting dynamics. And wages have been less of a problem as an inflation input in the more recent months. So it really was. I was thoroughly confused. I think I expressed that here on the podcast by Warsh's speech. He backed up this sort of talking tough on inflation, which he's been fairly consistent about, but sounding a bit more urgent in terms of the need to do something, which is, of course, is lifted. The front end of the yield curve in the US. But there's some really confusing dynamics in some of the specific things he's talking about that are really difficult to understand where he's going with this and if there's even a coherent message. Not to mention, there's the whole undermining of his belief in the quality of this PCE data series and the inflation measures that are out there, which he's done constantly as well. So how are we supposed to absorb the actual releases, in other words? And on to the actual. The actual releases, it's important to point out that the Bureau of Economic Analysis, the BEA, is going to be out with its revision of all the inflation data that is used to calculate, introducing a new methodology for calculating the PCE in the first print on September 30th, so this month, for the August data. We'll have this new data incorporated. It's widely expected because they've published the methodology to result in a small drop in the PCE data. So it's going to be out with its revision of all the inflation data that is used to calculate the PCE data. So it's going to be out with its revision of all the inflation data that is used to pretty chunky amount. Then again, this is all known, but the confusing factor is this is all known. It's different from the BLS series, and we're really confused about what Warsh is saying on inflation. So it's very difficult to come up with a coherent view, which is why this September meeting is still not fully priced for the Fed to pull the trigger on a 25 basis point rate hike. Let's see, running through the rest of what's going on. I mentioned that Besant doing all of his best to rhetorically encourage the idea that he's talking closely with Japan about their policy and what they should do, but also is on top of the yen situation, even though the amounts that the U.S. has contributed in actual market intervention terms are tiny to disappearingly tiny. But we also had a Bank of Japan member who's a very well-known hawk, so it's not really that much of a marginal surprise talking up, you know, consecutive rate hikes and all kinds of other hawkish talk overnight. We also had the JOLTS data up yesterday. It was slightly soft. I don't like this series, but it's worth mentioning. The quits rate was low, suggesting people were reluctant to quit, meaning it's a soft labor market indicator. The revision was negative for the prior month, and there was a small downside surprise to the latest month here. And then the ISM manufacturing was slightly disappointing across the board, 54.6 on the over 55 expected and 55.6 in the prior for July. New orders, quite disappointing as well, 53.7. That was way below the 56.8 expected and 56 plus from the prior month. And the employment one as well, disappointing, 51.2 versus 52.5-ish and 52.8 in the prior. So, but it's the manufacturing side of the economy is not what moves U.S. economy, broadly speaking, that ISM services will carry a little bit more weight in terms of the impact into markets. And then I guess rounding out the Forex space, I should mention that the RBNZ was out overnight. They did hike the rate, 25 basis points to two and three quarters. That was expected. But the sort of forward guidance felt soft, felt softer than the market was expecting. They do say they want to tighten more, but the timing is unsure. Some were speculating this might have something to do with the incoming election in New Zealand. I believe that that's in November and the next meeting would come right before that. That might be the reason behind it, but there was also an actual forecast for the RBNZ's own policy rate. And it was a few basis points lower, the average that is of those forecasting it than the prior meeting. So, saw a pretty solid dump in the Kiwi overnight. I'll see Kiwi rushing back up above 122 from way below 122 prior to this decision and getting within shouting distance of these highs of 122.88. They're the highest since 2013. And general risk off does not serve a currency like the New Zealand dollar very well, especially when it's surprising dovish in this environment. All right, let's head over to a couple of small corporate items here, corporate earnings, et cetera. Dell reporting, this one just shot the lights out. I mean, plus 10% reaction after hours. They've upped their revenue guidance, and this is just since May. So, we're talking from three months ago. They've upped their guidance for the total year's revenue through January of next year. So, we're only talking about the next six-ish months by $25 billion. So, they'll be pushing close to $200 billion for the year, if my math serves correctly. The 25 billion I know was correct. The 200 billion, I'm not sure I remember the figures correctly. So, enthusiastic response to that, especially impressive with risk sentiment on the defensive here. Palo Alto, and by the way, cybersecurity companies had a very ugly day of it yesterday. I think a bit of a hangover from the extremely positive reaction in the case of CrowdStrike to last week's earnings report. I don't know if there's other news afoot. I don't think there was. I think this was just, this is the high beta play at the moment after that CrowdStrike news. So, CrowdStrike and Palo Alto really were stinking it up yesterday during the session, closed down. Palo Alto's report, I don't think there was anything wrong with the metrics growing strongly, et cetera. But, it was basically flat to slightly lower after it reported. And today, we get Broadcom and Snowflake, two very interesting stories in each in their own different way up today after the close. And again, the backdrop here is super important for the market reaction, unless you're doing something like Dell did, which is a surprise to the degree it did with its AI servers and everything else. And then, you know, an interesting positive note on a negative day, we had Apple, 2.6% positive, new CEO, Ternus is his name. I can't remember his first name, taking over. And we have this big event coming up next week. He's just in time to be the presenter there, September 9th, where they're supposed to be introducing their first foldable device and are talking about some kind of home device, which I think, you know, makes sense, you know, deepening their efforts to sort of become individuals that are on the Apple platform via their, let's say their Mac, their Mac laptop, their iPhone. You know, taking your iPhone into the car, and then even maybe having your home device to sort of fully be ensconced in the Apple universe, if you will. And they're not spending that AI, those AI hyperscaling dollars, like all the other companies, basically of its size, or in the case of NVIDIA, risking this circular financing thing. So they're being rewarded for it at the moment. Massive buyback on the way $100 billion or something like that. So all that hyperscale, it's almost become the anti-hyperscaler, this company, not spending the money on new CapEx, and then rewarding shareholders with the buybacks. There's the, you know, the dark speculation that not having this AI strategy outside of, you know, passing a lot of it onto Google is a mistake. But there you have it for the moment. All right, pretty much a wrap for today. I do have a couple of links in the podcast episode description. There was an exchange I saw on X between Steve Ho and Joe Biden. And I think it's a good one. And whether China needs to revalue its yuan and certainly the why trade barriers, in their view, or whoever started the conversation, should be significantly higher, of course, because China subsidizes the heck out of its export industry and doesn't consume enough. So that imbalance is then being felt by the rest of the world. And then there's even a great article, why the world needs to force China's yuan to revolve, or to revalue, I should say revolve, revalue. And that's an easy argument to make on the headline, but it's really a structural problem more related to, again, the subsidizing of exports, the so-called mercantilism, neomercantilism, whatever you want to call it, the policy that's at the root of that, not just simply the value of the currency exchange rate. But some food for thought there, as well as Ola's piece on the returns from these energy companies. Future results may not reflect what's happening in China. But I think it's a good one. uh, before this starts to resolve one way or the other. And, uh, so yeah, stay careful on that note and we'll be back tomorrow 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 market call at Saxo bank.com that's market call at Saxo bank.com. Saxo serious trading worldwide.