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 Thursday, 15th of October, 2026. Fascinating day yesterday with this CPI print. I had an almost emotional reaction, not to the print itself, which was of course hotter than expected. The headline hitting 3.7% year-on-year, a bit more than expected. The month-on-month was in line on the headline. The core, both the month-on-month and year-on-year higher than expected, 0.3% and 2.6% respectively. Remember, we're coming off of a multi-year low at 2.4% in August, by the way. But just an absolute fire sale of treasuries in the market. I was surprised at the vehemence of the reaction, given it was only a 0.1% higher than expected figure. And this helped drag the dollar higher as well. But then, you know, I've been kind of looking for the idea that the treasury market might be a safe haven, that it might be worth picking up some treasuries here. And then suddenly later in the session, of course, it reverses and reverses massively. So this saw the dollar lower again, and of course yields lower again with equities. I'm not so sure the focus, you know, if the focus was purely on yields, you would have seen equities selling off on the higher yields, which they were, but then rallying when yields retreated. And instead, it looks to me like the evidence we have here is in favor of treasuries being a safe haven as we continue to mark down risk assets, and most intensely in the high-momentum AI hardware space. So we're seeing pretty much, everything heavily down in that space. The NASDAQ itself, NASDAQ 100 was down over 2%. S&P 500 only down 1.1%. Kind of makes sense, that ratio, a high beta on the NASDAQ 100 to the big cap tech, et cetera. If you look at the equal weight, only down 0.6%. And in fact, if you look at the S&P 500 members, only 260 had a negative day. So 240 gainers on a day with the market down 1%. This is a market full of divergences. I'm wondering if we're seeing long, short portfolio, active portfolios really in for a drubbing yesterday on this. And I wonder if that's a driver for potential further downside because of these needing to readjust portfolios with the longs are going against you and the shorts are going against you at the same time. It's particularly brutal. Could be some deleveraging there. I don't know. Just again, emphasizing the crazy internals in this market. Russell 2000 was down a bigger minus 1.2%. Is it 93%? If I can read my own handwriting here. And that takes the overall correction to down more than 11% and well below the 200 day moving average yesterday. That's just showing you how ugly some pockets of this market look, even though if you just look over at the NASDAQ 100 and the S&P 500 market cap weighted indices were just barely off the all-time highs. Basically, not much more than this one session off of the all-time highs. So a remarkable session, a remarkable reaction, you know, the one figure that's supposed to set us all on edge about higher yields to come higher FOMC, you know, path, etc. And then you get the of course, you get the knee jerk reversal. That's the difficult part. But then sorry, the knee jerk reaction to the data and then the reversal is particularly brutal. But it's coming here after this hot figure makes the signal value maybe a little bit more intense and more relevant. By the way, and so you know, it was the front end of the curve. So we ended up with about 16 basis points at one point on the US two year Treasury yield only about 12 basis points on the 10 year. That all reversed out and especially at the longer end of the curve, some big buying coming in. So we ended up the day down, I don't have the intraday high noted here, but we ended the day down below 5.10%. At least by this morning, it was even below 5.09%. And essentially, it's the lowest levels on the 10 year in over a month. So very significant for us. And the October odds still steady around 29% in December priced at more than one rate hike. And March priced at more than two rate hikes. So maybe that's the path. Maybe it isn't, I would suspect if we're in for a very ugly equity market correction, far too early days to call that. But and even if we aren't, if we're starting to see growth impacted, I wonder if the Fed delivers those two rate hikes. And on that note, I just really like this. I'm going to put a link to a tweet that or ex post that Michael every put out. I'll put a link to it. But basically, it's the guy from the office. I can't remember the character's name in the office with two signs saying, well, if Warsh is going to raise rates to fight oil related inflation, no matter what, then basically, the Fed has outsourced its policy decisions to Iran and the IRGC. And I think that's a critical point here. Rate moves have absolutely nothing to do with whether oil prices stay at around 100 bucks or go down. But I think that's a critical point here. Some, you know, something to chew on there, I think. In any case, I think, so we have, you know, what are we supposed to look at and what's the driver here? I don't know what the driver is here necessarily 100% besides there seems to be a general sense that people are spooked in the AI space. And we have some of these credit concerns coming in, and I'll get to that in a minute. But it is interesting to see this upside down correlations in the dollar and risk sentiment. And it kind of makes sense if we think about one of the big drivers has been. For dollar strength, that is, has been the big drive higher in treasury yields and the aggravation of that from the oil price, et cetera. So when the treasury yields reverse out, well, the dollar strength reverses out. And while traditionally sort of that liquidity of the dollar and, you know, maybe treasuries, et cetera, was seen as a safe haven linking that treasury to the dollar, I'm not so sure that's the case this time around. You have to think about the bigger portfolio flows as well. So if those continue to correct, risk sentiment continues to remain weak, that could be the focus more for the dollar. As well, that could yank the rug out from under these US treasury yields because the worst case scenario, you know, there's some key player in AI reverses or goes belly up, whatever. And we have a, you know, some kind of air pocket in sentiment that is going to bring down the economy. There's so much linking of the economy to the AI build out. And especially also the wealth effect connected to that for consumption. So, and that would therefore feed into likely the FOMC rate decisions. So that whole complex leads me to suspect that we're not going to see the same style of risk correlation and the dollar as we have seen in the past. For the yen to really post a strong snapback with that weak, sorry, with the weak reaction to the strong US inflation print and that very massive rally at the long end in the US treasuries, supposedly should be the ideal combination for Dalian to really make a statement and come, you know, come screaming downwards. Instead, it merely sort of reversed its pump slightly. When I say pump, it did pump above the local highs there, high 158s, and ended up down below 158 at one point with the help of some, you know, some, you know, some, you know, some sort of a lot of money. A verbal intervention overnight from finance minister Katayama, but then, then it bobbed back above 158. Then it subsequently fell a bit lower as 157.75 before I came in here to record the podcast. But if you had given me the US treasury yield picture beforehand saying, okay, actually, what's going to happen is US 10 years going to go to 5.1%. And we're going to have a really nasty day of down 600 points on the NASDAQ, I would have said, Oh, wow, I bet Dalian would trade down below 157. And we're a full almost figure above that. So let's give it a little bit of time. But to me, this is a little bit spooky. Would have thought this was more supportive of the Japanese yen. And then also interesting as well, we get a really weak Aussie overnight, the Australian dollar weakening off a very ugly jobs report. The participation rate dropped 0.2%. This is always important for the calculation of the unemployment rate. But the unemployment rose rate rose to 4.7%, up 0.1%. Not from the prior month, actually, the prior month was also revised to 4.7%. Basically, the post pandemic cycle high. Pre pandemic, it was a good jobs market, it was actually above 4.7%. But it's the direction that is a concern, as well. You know, the pro cyclical correlation of the Aussie is there. So it was very weak, even weaker than a weak dollar. And key cyclical metal prices were also on the defensive. We got silver down almost testing that key chart point. But as well, Australia is one of the most sensitive economies among G10 currencies to the interest rate with 95% of new mortgages in recent years being issued on a floating rate, because, you know, because rates have gone up as much as they have. And the assumption being that they'll somehow normalize. So in any way, that transmission happens very rapidly and house prices have been falling and actually tumbling really since their peak earlier this year. So there's been jokes that Australia is an economy that essentially digs things out of the ground and sends them to China with a financial services system and housing bubble overlaying it. And it's not the truth, but it's not that far from a significant part of what the Australian economy is. So I think I would suspect that the Aussie may have peaked here for a while. Certainly the crosses like Aussie Kiwi and some of the others getting really overstretched. If you compare them to the yield spreads, et cetera, the assumption that the RBA is going to – that they sort of overperformed anything relative to rate spreads really. So let's see. Aussie Kiwi way back below 124 after nearly pressing to 125 yesterday before that jobs report for September. In the roundup, what were the specific news items leading to all this? I'm not so sure there were any. I mean we had earnings coming in, Morgan Stanley doing fine, at least as somebody said to me. I didn't actually check it myself, but Bank of America was down very heavily, almost 5%. So that was an ugly look, but it's really not banks that are in focus here. It is the tech sector. Dell was off over 11%, the worst performer in the S&P 500. CEO Michael Dell, I'm not sure this is the reason. The stock was down in any way, but was out saying this whole memory issue is a four-year problem, getting enough memory supplies for the needs for the compute. But it just seems to be a broad situation here. And then the things I mentioned yesterday, some of the key players in the space where we're seeing some really things that are on tilt in terms of the debt. And this can risk becoming a spiral. So are we about to face some kind of credit event from some key player that is going to cause some knockouts? I think it's going to be a knock-on contagion across the sector. That is the primary concern, I would say, for whether this is just a brief and maybe a little bit deeper sell-off here or whether this turns into something more nefarious. And as we're barreling into earnings season here, I think the stakes are pretty high. And the key players I'm talking about here, the very key player would be CoreWeave. Up again, the CDS prices, I mean, we're just waiting for the credit event really at these levels. CoreWeave, CDS. CDS prices hitting 1,117 points. One years of insurance costing 11%, more than 11% for a CoreWeave bond. The move in that Paramount Global, so the Skydance linked takeover bonds 601 basis points. Up again sharply. Oracle's at 288. It was up sharply as well. And then SpaceX, which is still quite low down there in the low 200s. I was just trying to connect that with the risk of the midterms actually a little bit. Because there's a heck of a lot of controversy about what is happening with Ukraine. I think Trump is taking this very personally, the whole diesel price issue. He does not want to wear that issue linked to the diesel supplies being cinched off from the Hormuz Strait, but wants to blame it on Ukraine's bombing of Russia, which is only part of the equation. Whatever. There seems to be something, there is something clearly very personal here that's been in exchange. Ukraine feels betrayed. Zelensky. Zelensky has said as much. And apparently, and this is not 100% transparent what is going on here, but Ukraine has had its access to the military grade Starlink links cut off. I think a Wall Street Journal article does a decent job of running through what is going on. And I'm providing a link there. But if this is just sort of a Trump or U.S. policymaking via Trump asking Musk to do him a personal favor and cut off Ukraine's satellite links, this is a risk. I would say for SpaceX politically, because while the Bezos's and Zuckerberg's of the world are always going to flex, if you will, don't really care which party is in power, and will obviously try to keep both sides friendly, it does look like Musk is far more ideological and is willing to keep his investments or his alignments or alliance with the Trump side and the Republican side of things. So just wanted to present that and float that. A little bubble out there. I didn't see what SpaceX did yesterday, but I did note that in prior days, it has had a pretty ugly run to the downside after the big squeeze higher. Yeah, instead of being lazy on that front, I just pulled up by my trader on my mobile. It's down another 2.8%, so a bit worse. Makes sense. A little bit high beta to the general market direction yesterday. We also had, and is this a preview of how the market is going to treat earnings or resistance because the whole broader. AI hardware space is spooked, and we had the cost be down, what was it, 7.6% last night. That's following on to the minus 4.3% we saw to the downside in the SOX index yesterday. And Europe is sitting there messing around at only down about a half percent this morning. Typically, Europe, without much of a tech overlay, is maybe enjoying the yields going down more than thinking about the whole tech sector blow up. I don't know. Nikkei was down almost 5%, by the way. But back to. TSMC. We were tipped off by the sales ahead of the event. They report their revenue results, and those were quite strong. So we knew this was going to be a strong quarter. But everything looked great, as far as I could tell, in the report. And yet the stock was off quite sharply. So what is it that prevents the concerns around the AI build-out? Is it linking it to the key players here I mentioned, the core use of the world being in trouble? Could somebody take them over and put that to bed, and we can kind of all recover for a while longer in this? Or is this something that's going to. That is the key here, not maybe what these companies are reporting for the quarter gone by, but how the space is going to survive this little scare here. If it is just a little scare or something that's going to mushroom into something far worse in the near term. Don't know. Let's see. Key earnings coming up next week. And if I'm able to put in a podcast tomorrow, which I hope to do, I have a shortened day because I'm going on holiday for a long weekend. Preview of what's coming up next week. But I know Tesla at minimum is coming up. Not a bellwether there, but plenty of other big companies reporting next week. All right. That pretty much is a wrap for today. I will put in a few links here in the podcast episode description, that humorous Michael Every tweet on Fed policy being supposedly controlled by Iran, if they are just reflexively reacting to what oil prices are doing. The Wall Street Journal article on the Ukraine satellite access and all that kerfuffle there. And then we had, there was a very interesting Bloomberg. Somebody posted it on X. I'll have to find the original article talking about this China basically moving its U.S. Treasury holdings to custodian banks that are outside of the U.S. And it may not be unwinding its U.S. Treasury holdings as much as people thought. It's just an interesting one there. And then the Wall Street Journal also with an article about Space Force and the weapons they use and how they sort of implemented. This strategy in the Venezuela coup where they extracted Maduro and obviously overwhelmed the forces there on the ground by cutting off satellite access with all kinds of crazy new electromagnetic impulse weapons. Super interesting. You can have a little deep dive. There's a little video on that one too. And then this one courtesy of FT Alphaville on dark matter, what it is and what it isn't. This is just an area that fascinates me. It's cool that they send along. These nerdy links to astronomy stuff. But it's a really cool deep dive based on some observations of the interactions and formation or something. I haven't read the entire article. Brief skim as usual before I get in here on what the study of these galaxies says about dark matter, which has had – there's been a lot of controversy of late on whether it even exists. And if so, what is its nature, et cetera. So one for maybe for extended weekend reading. As there's plenty going on in this market with the geopolitical backdrop and oil always there. We have come off a bit in oil prices. Maybe that's providing a modicum of relief here even though we're down – at least before I came in here, down 430 basis – not basis points but points on the NASDAQ 100 futures. Europe trying to gain its feet this morning but just a lot of foot here. Feels like one of these sentiment sort of whoosh periods. You know, stop and take note and take stock of what's going on type of period. Hard to tell whether this is going to, you know, again, mushroom into the big one here. I would never try to call that. But it does look to me like we have the risk of, you know, maybe a bit more of an event here to sort of take stock of matters before we can move forward with whatever comes next. Certainly interesting with all these earnings incoming and the reactions to that. So stay tuned for all that stuff. I hope I'll be back tomorrow. If not, I won't be back until next Tuesday because I might. Monday off. But do stay tuned, stay careful, and we'll be back as soon as possible 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. I'll see you next time.
PodcastTranscript AI