Markets on tilt: when will we see a proper slide lower?

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 Thursday, 8th of October, 2026, and we have markets in a pretty negative mood. We get this strange phenomenon where, for example, yesterday in Europe, the mood was proper bad once again. I think it's easy to point to the proximate cause being there. Well, to one degree, the latest bump in oil prices, but also these French yield spreads to Germany being aggravated once again, and we're back up above 140 basis points here this morning. And then overnight, a very ugly session in Asia, despite a couple of very strong tech reports. I'll get to that later. And we followed through, sorry, I'm getting ahead of myself. Roll back to the U.S. session yesterday, where we started off on a pretty ugly note, but we managed to rally most of the day, and we barely finished down on the day. Go to Asia tonight, or overnight, I should say, for the Thursday session, and a very ugly session indeed. Nikkei Kospi down, the straight times index in Singapore just absolutely dumping. And we have U.S. futures off once again, quite heavily ahead of the open. A further rise in oil prices, and great to see that. to have you back in the studio, Uli Henson on commodities. What's the approximate cost here? It looks like this Hormuz Strait is remaining an issue. Fresh attacks. We've got dated Brent. That's really important for people to understand. Dated Brent, which is sort of the prompt contract, as far as I understand. I don't know what the schedule is for when that gets delivered, but that's basically the most sort of front-end contract or price. $129 I saw this morning versus December Brent at that time was $103.5, and I think it's gone above $104 now. What's going on? What are we looking for next? And WTI is only at $91 for that December WTI. Yeah, let's take the WTI first, because that's basically increasingly a reflection of what's happening in the U.S. U.S. crude stocks inventories are actually more or less in line with the five-year average, if we look at the weekly data coming from the DOE. So it's not crude that the U.S. is missing right now, but just like everywhere else, it's the refinery capacity to produce all the fuel that is needed right now. And the U.S. refineries are already running at seasonal record high levels right now, so they're doing what they can. They also, we just recently, last week saw that exports of crude and diesel jumped, crude and fuel products jumped to the highest seasonal record or level ever. And that's why the U.S. consumers are still paying these high prices for the refined products, because they're still maintaining those exports where the demand is even greater elsewhere. They are indeed. So crude oil is one thing, but once you have a barrel of diesel or gasoline, it's really the same wherever, and it goes to where the price is the highest. So that's why they're also still commanding high prices for refined products in the U.S. But the oil price, yeah, Brent back above 104. Dated Brent back close to $130. Just simply highlights that all the recent talks about increased flow is correct, but it's also now showing signs of weakening again because iran sending no barrels out at all um a cornered iran i would say is a very dangerous iran and um and i think the the risk of of attacks is uh is is rising and you don't need uh high high um high standard missiles or whatever you can use drones we've seen we've seen recently how how much damaged drones can do so um so that's the that's the risk and just overnight we saw attacks on the ship near qatar so that's the furthest into the gulf that we've seen attacks so far so um so the supply is is coming out but we also have to remember every time there is this increase in in attack on ships what doesn't come through then that's fuel products ships carrying fuel fuel products so we just saw an update from kepler yesterday which has gained a lot of acknowledgement in in the last few months because of their tanker tracking abilities they basically say that uh the that while crude is um getting close to where the or at least last week was getting close to pre-war levels we still have fuel products coming out at least in the 50 percent reduced compared to what we saw before and that's really what we need um in order for for the for the inflationary input on on high energy prices that for that starts to start east so the only thing that can solve this is to get the the straight fully reopened get the refineries back up and running and uh so far the uh the prospect for that is uh looks pretty slim and i saw as well uh there was this headline you were talking about this morning as well that trump is looking or asking the pentagon apparently to draw up plans for for maybe attacking iran before the midterms maybe he wants to do the uh the flex on we're trying to do something about the situation before the election it doesn't look like it's a promising for uh risks at least uh in the area no exactly and um and just on the on the diesel we were there was a lot of excitement on friday when g7 announced that it was going to be announced this uh emergency release of 100 extra million barrels but as it turned out yesterday the iaa basically uh stated that um that this was not this was not automatically meaning that it would be it would be extra barrels it would still be part of the 400 million that was originally announced and they basically just asked the the members to step up the the releases france went a little bit alone here they announced a release of 10 million barrels of diesel to the domestic market and that's really important to me and i think that's really important to me and i think that's really important to me and i think that's really important to me and i think that's really important to me to to understand when it's uh when it's to understand when it's uh when it's to understand when it's uh when it's strategic reserves in in held in in strategic reserves in in held in in countries in europe that is for the domestic market strategic countries in europe that is for the domestic market strategic reserves held in in the u.s i believe also reserves held in in the u.s i believe also in japan is for the international market so that's why spr in japan is for the international market so that's why spr releases in the u.s benefits the global economy releases in the u.s benefits the global economy or the global supply system whereas supply releases in or the global supply system whereas supply releases in in some of these from some of these european in some of these from some of these european nations is primarily meant for the domestic market so it may nations is primarily meant for the domestic market so it may have a have a small positive impact on in have a have a have a small positive impact on in france on lower diesel costs but again 10 million france on lower diesel costs but again 10 million barrels from a global perspective when we are barrels from a global perspective when we are missing what 1.5 1.6 million barrels on a daily missing what 1.5 1.6 million barrels on a daily basis you can quickly add up how many or how few basis you can quickly add up how many or how few days of uh supply that that actually is yeah i days of uh supply that that actually is yeah i noticed as well we're talking about the seasonal noticed as well we're talking about the seasonal build and natural gas just to switch energy build and natural gas just to switch energy products they're still below what it needs to be products they're still below what it needs to be this time of year uh for europe i guess that's this time of year uh for europe i guess that's being uh priced in europe back above 80 uh euros being uh priced in europe back above 80 uh euros a megawatt hour there are risks that we could hit a megawatt hour there are risks that we could hit a hundred uh into the winter it all is it's all a hundred uh into the winter it all is it's all weather dependent because of the uh the spike we weather dependent because of the uh the spike we we tend to see this time of year and also have to we tend to see this time of year and also have to remember that uh whatever's in in stockpiles no in remember that uh whatever's in in stockpiles no in an average year what's in stockpiles as we head an average year what's in stockpiles as we head into the winter really only accounts for around 25 into the winter really only accounts for around 25 to 30 percent of total uh demand during the winter to 30 percent of total uh demand during the winter period underlying flow rate that's exactly so and period underlying flow rate that's exactly so and the flow rate is really where there is the the flow rate is really where there is the the flow rate is really where there is the concerns because concerns because concerns because the middle east is still uh still out uh the middle east is still uh still out uh the middle east is still uh still out uh qatar is still uh only sending a few qatar is still uh only sending a few qatar is still uh only sending a few ships through uh compared to normal and ships through uh compared to normal and ships through uh compared to normal and that basically means if we do get a cold that basically means if we do get a cold that basically means if we do get a cold winter in asia winter in asia winter in asia then we have to compete for these uh these then we have to compete for these uh these then we have to compete for these uh these lng ships and that will drive up lng ships and that will drive up lng ships and that will drive up costs so so we are most certainly not out costs so so we are most certainly not out costs so so we are most certainly not out of the woods yet and the risk of higher of the woods yet and the risk of higher of the woods yet and the risk of higher prices is still a risk in the in the prices is still a risk in the in the prices is still a risk in the in the coming months coming months coming months on the other hand in in the u.s um the on the other hand in in the u.s um the on the other hand in in the u.s um the nino that's been talked so much about we nino that's been talked so much about we nino that's been talked so much about we we mentioned uh recently that potentially we mentioned uh recently that potentially we mentioned uh recently that potentially could mean a mild winter in in europe could mean a mild winter in in europe could mean a mild winter in in europe but wait where it's it's a little bit but wait where it's it's a little bit but wait where it's it's a little bit easier or where historically it's shown easier or where historically it's shown easier or where historically it's shown to be more proven is in the u.s where to be more proven is in the u.s where to be more proven is in the u.s where the uh the the eastern seaboard of the the uh the the eastern seaboard of the the uh the the eastern seaboard of the u.s where most of the demand is uh is u.s where most of the demand is uh is u.s where most of the demand is uh is during the winter during the winter during the winter take can there are expectations that it take can there are expectations that it take can there are expectations that it could be a milder winter there so um could be a milder winter there so um could be a milder winter there so um that will that will keep the uh that that will that will keep the uh that that will that will keep the uh that should keep the the demand that at uh should keep the the demand that at uh should keep the the demand that at uh manageable levels assuming that can manageable levels assuming that can manageable levels assuming that can translate into lng barrels uh coming translate into lng barrels uh coming translate into lng barrels uh coming across the atlantic to uh for europe across the atlantic to uh for europe across the atlantic to uh for europe yeah that's uh that at least it means yeah that's uh that at least it means yeah that's uh that at least it means that uh whatever export capacity the us that uh whatever export capacity the us that uh whatever export capacity the us has is probably going to be used to has is probably going to be used to has is probably going to be used to fully utilize during the winter months fully utilize during the winter months fully utilize during the winter months just to capture just to capture these just to capture just to capture these just to capture just to capture these massive margins that uh that you have massive margins that uh that you have massive margins that uh that you have when you have what a six seven eight when you have what a six seven eight when you have what a six seven eight fold price difference between the us and fold price difference between the us and Europe. Yeah, and it's interesting to see how those draw levels, what's going to happen there in Europe. In any case, it's been quite mild so far, and it's still early days to talk about cold weather yet for the European part of the continent. Speaking of Maldino, just maybe one product that you mentioned the other day was sugar. Yeah. Tell us briefly what's going on there, and then we can switch a little bit to the metals markets. Well, sugar was already on a. Well, it has been on a. Well, almost on a tear in the last three months. We did go through a small correction because there was a very strong build-up of speculative interest that had to be reduced a bit. And then we've seen a resumption at one point this week. We were up more than 10% on the week. Some of that came from the election in Brazil at the weekend, where the sharp increase in the Mexican. or the Brazilian rail basically made it less profitable for sugar. owners to sell their sugar, so that basically that could lead to some stockpiling or less supply coming to the market, so that also helped drive up. But it's interesting because sugar is kind of caught in the crosshairs of a linear because sugar. a linear can mean wet conditions in South America, which is not good for harvesting and exporting of sugar. And at the same time in Asia, it points to hot and dry weather, which could lower production. So that's why sugar is potentially the biggest. the commodity that could see the biggest impact from a very elevated LDNU. It's been quite a move from that 15-cent area base to above 21 recently. Yep. All right, over to gold. It makes some sense here, of course. We have this strong dollar. We have these yields pushing to the highs. China coming back from the golden week, and that maybe is something certainly worth noting, is China official buying has been significant. We had a pretty ugly dip yesterday, well below 4,100, certainly a local low, 4,066. That was scooped up. It's still a choppy chart. Silver giving up to ghost a little bit more. It was down well below 60, even below 59 at one point. It's just not very inspiring. I know we're saying it's like it's leaning into very stiff headwinds, to say the least, with these external developments. But yeah, I don't know what to say other than we're sort of structurally, strategically interested in this gold bull market resuming, but it is a tough set of circumstances for gold here. Yeah, indeed, John. It would be easy just to say that we have a tug-of-war between short-term focused, macroeconomic focused traders trying to sell it as yields and the dollar rises against long-term investors picking up gold, especially through ETFs, looking for the worry, worried about the actual impact of these rising yields. Yeah, and I mentioned that because you put out that chart into the chat, our internal chat, with this remarkable sort of chart where it shows these holdings almost always follow the price. And then suddenly we have the price that's a long-term correction here. And the ETF holdings are really ramping up. I don't know if I need to be a contrarian and say, "Wow, this gold bear market could continue for a while," or what it means, but I just think it's a weird divergence. It's absolutely weird. And it's crazy to see U.S. 10-year real yields approaching 3%, and we got ETF holdings approaching a four-year high. We're now above the levels that we saw when prices spiked to record highs back at the start of the year. So something is going on. And if you then look over to the silver chart, we're actually seeing silver holdings drop. And probably some of that is also explaining why the gold-silver ratio is back above 70 for the first time in a couple of months. So silver is really struggling to keep up. So that indicates that this is a haven story that underpins gold. And whether it's geopolitical or whether it's fiscal worries, that is, I think, probably a mixture of both. But most certainly interesting to see that there are investors out there who are actually taking the rising yields as an opportunity to buy gold because they see it as a potential risk down the line. All right. Well, thanks for the run-through, Ola, of the commodities markets. And, Ola, let's see if we can stay on top of things as the geopolitical news flow is really a major concern here. And all the seasonal stuff on natural gas, by the way, as well. And that rolls into the Hormuz Strait situation, too. All right. As mentioned, so we have the re-aggravation of spreads in Europe. That is a concern. We have a pretty ugly risk backdrop. And as I referred to at the top here, you're looking at overnight reports from two critical companies, massive ones. Samsung was out reporting, supposedly missing the very most aggressive end of the expectations. But we're talking about still just unbelievable growth, these numbers, almost nine times the profit they had of this quarter last year. And their profit of about $80 billion, hitting close to that for this quarter, is larger than what NVIDIA is pulling home in profits. This is a massive profit level. And the stock is down 1.5%. So maybe, yes, maybe they missed the very highest ends. But I think that's just a concerning read here. We've been on a defensive stance here a little bit in Asia. And then we see these stocks have come down from their big sort of leveraged up crazy run they had earlier this year, but still not greeting that profit or that earnings announcement very well. TSMC, similarly, I didn't see anything about them missing estimates. I thought their revenue estimate was above, at least above consensus. I don't know if it wasn't above the most aggressive consensus, but it was above the baseline consensus number. And that stock was down a couple of percent. So these are two critical companies for the whole AI hardware space. Not a good look here. We did see the SOX index down yesterday, a little over a percent. And as I mentioned, we were down much worse intraday. And we rallied a lot relative to the close. So the main market cap weight indices in the US, only off less than a quarter of a percent. So we're down a little over a percent. The equal weight S&P 500, so the median stock was down a lot worse. It was down three quarters of a percent-ish, the S&P 500 equal weight. And the Russell 2000, and this is kind of interesting, down minus 1.3%. It's now in a 9%, almost getting to a properly defined 10% correction status with that 9% drop. And it is interacting with its 200-day moving average. Talk about these divergences here. This is unsettling. And then we have Europe also down. Again, it was down yesterday, quite ugly. And it is down badly today, stumbling out of the blocks. I think it's the sovereign spend situation. It's the energy situation, which is Europe is critically impacted by both on gas and on natural gas and oil. We have the STOXX 50 also interacting with its 200-day moving average. And it is off around 7.3% from the high. So it's an ugly look across the board, getting some ugly vibes here. I'm not sure how much of this is just the oil-driven bit versus a whole nexus of things. And I want to point specifically at some of the, it just seems we're getting a rising noise level on the private equity space. News story after news story. We've had a trio of these overnight, or yesterday, whenever it was. Oracle, SpaceX, Broadcom, all looking for these big financing deals for buying more stuff, buying more chips. Yes, it feeds the beast. It feeds these amazing earnings reports we're getting from the key chip and other hardware companies. But what is the stability of this financing when you're starting to see credit conditions deteriorating and pushed at the margin as well by the overall rise in long-term bond yields? So just shaking my head at it a bit, I saw some reference to SpaceX funding around $40 billion. Why does SpaceX need to borrow $40 billion when they just did this IPO? And there was something that I think is really interesting about this. And I don't know if you've heard about it, but I think it's really interesting. And I think it's really interesting to think about it. But more specifically, if you want to consider where we are with some of this, not really necessarily AI-related, but more leverage in the system-related, which clearly the AI lending or borrowing and private equity structures have to do with, there's also just the overall hedge fund borrowing and prime brokerage and how the Wall Street banks are enabling this. So of course, after the global financial crisis, the powers that be cracked down on these investment banks, and they're prop trading and leveraging their balance sheets to eye-watering levels because of what happened with Lehman, obviously, and the whole systemic crisis that resulted across the wildfire contagion across the financial system with these rules about their balance sheet stability. So they have that, but now they're doing a lot of lend lending and prime brokerage to outfits that are sort of playing with the types of leverage levels that they were back in the day. And at the end of the day, is this not the same setup or risk flowing into here? It's just who's the actors that's borrowed the most? Are their books clear enough? Or do the risks suddenly multiply if a lot of correlations that were assumed to be random and we have offsetting trades? And so the net exposure appears to be okay, but actually, the leverage is 20, 25 times of some hedge fund or some, what do they call these big shops like Jane Street and Citadel, et cetera. Suddenly, they're the systemic actor because they've gotten so large. And meanwhile, you have the Wall Street banks, the Goldman Sachs, the Morgan Stanley's doing a lot of lending into this. So it's something that might ought to be keeping us up a little bit at night. There's a good FT, what do you call it? I think it's a big read, at least it's a nice long article. But it's a good FT, what do you call it? The title is How a Trillion Dollar Hedge Fund Borrowing Spree Became Wall Street's Cash Cow. And I'll put a link to that in the podcast episode description. So interesting reading there. And other parallels to LTCM, moral hazard is going to be there if all this stuff blows up, et cetera. And just to emphasize that maybe the market is a little bit worried here, and maybe it's worth looking at something like Goldman Sachs stock price itself as an indicator to concern in this case. But I think it's a good FT, what do you call it? base. It's off 23% from its all-time high back just back in July when it traded to $11.54. It closed yesterday at $887. Morgan Stanley is down 18%. And then sort of in the same vein, there was an ex-post I saw referring to a long conversation with this guy, Paul Kudrowski. You know, take his credibility for what it is. He seems quite very competent on the technology front, at least. Whether his market call is correct, who knows. But just running through how the AI bubble pops and the risks into the private equity space, that's worth mentioning as well. I'll put a link to that, of course, as well. And there was an interesting one from, and I'm actually not done here, so I will get back to a couple of other things I wanted to talk about, but I'm just going through the links right now. One I saw, and this was an FT Alphaville link to medical evidence of what sugar rationing did for the better. For those that were unable to get access to sugar as both prenatal and as babies during World War II in the U.K., Versus those that had free access to sugar from a well-known hard date when sugar rationing was released. I wonder if it's the sugar itself or is it just overall nutritional maybe excess or the change between having plenty and not having quite enough or having just barely enough. But anyway, very interesting health outcomes that were quite clear and quite demarcated from that. Maybe a note to self on the consumption, although I guess it's a little bit too late if it's about my sugar consumption as a child, which as an American was tremendous to say the least. Yeah, so what else do we have? We have a little bit on the macro and FX side. Of course, I did mention rates sort of obliquely. We saw another sell-off, more weakness in the treasury market yesterday. That reversed intraday. So we saw 536 on the 10-year. That was a new 24-year high basically. Closed the day around nine basis points below that. But now we're sort of reversing back higher. A little bit of a concern there. We need to see these yields to stay down to avoid this particular source of risk into the general risk sentiment picture. On high yield debt, by the way, that had been sort of been falling the last several days. There was one to uptake and then it's otherwise fallen over the last, I think, three or four days. And then yesterday it was widening again, nine basis points, the high yield. We saw a little bit of a spread versus U.S. Treasury's indicator, I track. And the front end of the curve, pretty steady. It actually fell to a local more than two-week low at 477, 4.77% yesterday, the two-year, has backed up a little bit today. The FOMC, you know, wasn't terribly interesting. There's, you know, mention of some, you know, some Fed members thinking, look, this is supply side. It's driven by high energy prices. It's not, there's no risk of a knock-on effect. When it's a supply, some sort of supply shock type of, you know, from this type of development, whereas others are saying, no, this could be demand driven. And, you know, there could be second round effects, et cetera. So a bit of a debate there, but there was no notable increase or no notable discussion around October. So the October odds remain low, FOMC meeting this month towards the end of the month. All right. I think that does. Finally bring, oh, and then in FX, we've just seen the usual stuff. The dollar is, you know, sort of firmed back up again yesterday. It's not really done much since then. We've seen the euro recovering a little bit, despite that French blowout, yield spread blowout, when I say recovered, mostly in the crosses. The yen, there was an odd looking sort of rally, but of not a huge magnitude, but of, you know, decent sharpness late, sort of overnight, if you will, from a European perspective. And then that was just sort of erased quickly. Later in the Asian session, there was a strong demand for a 30 year JGB auction. So at least that, that side of things looked benign, but this, there's just no momentum really in either direction for the Japanese yen at the moment. And Dalian is in a difficult area. This 158.50 plus is sort of the last real resistance until we get into, you know, massive intervention, rumor territory, and, uh, difficult, uh, technical territory. So, you know, we're going to have to wait and see what happens. I think we're going to have to wait and see what happens. It's a difficult, uh, technical territory as well, which that 160 plus area has capped, uh, sort of Dalian for, for quite some time. But again, only with the help really, it seems of intervention. I did not mention, uh, we do have a Spanish election being called now, a snap election. I don't have the date for you. It's usually pretty quick, these snap elections, but it does look like Spain will be one of the first or the next, I guess you could argue, uh, to join the sort of right populist direction. The outgoing, uh, left. center government is, is not going to do well in this election. It looks like in this, uh, uh, what is it called? Partido Popular, the popular party, I guess it's called the center right party. Their support is reasonably steady, uh, relative to the last election. But the main development is the rise of this Vox party, a right populist party pulling at 18 plus percent. And that combination Vox plus PP is apparently the Vox is not one of these parties that's being sort of left out in the cold, like they're trying to do in both in France. And in Germany with, um, the national rally in France and of course the AFD in Germany, uh, I assume that the PP is willing to work with this Vox and that would make a, for a right leaning government with the key being, how do they negotiate their various policy positions, depending on the strength of the, the relative strength of those two parties in this election. Interesting to see for now, Spanish spreads, by the way, very different place from both Italy and especially France, only 66 basis points wide, uh, Spanish tenure. Right. Right. Versus the German tenure yield, uh, Italy, by the way, is around 119 when, uh, the French spread was at 143 earlier this morning. Okay. That is a wrap on the day. Concern levels very high here. You know, we do see this remarkable, you know, resilience and bouncing back in us indices. I don't know what drives it. It just looks like it's the last thing standing in a world that is getting a little bit concerned here, uh, elsewhere. Uh, but, uh, you know, nothing is for certain. We'll see how things develop 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. Go. Worldwide.