The AI slowdown narrative weighing more than bond carnage...for now.

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 Tuesday, 15th of September, 2026, and markets remain on edge, although I think, to my mind actually, quite orderly markets really, if you look at where things are headed in the bond yields department and in the energy department yesterday. We did come off those highs, what was it, Brent was pressing on 110 bucks a barrel, so it's down a couple dollars from that this morning. But we saw the U.S. equity markets managing to come back from those lows and from the double whammy of this focus on these yields and this anthropic story. I'll run through all the angles on that, this anthropic story, the slowdown idea, the response to that, the pattern of the reaction across different aspects of the equity market related to that, because we've got you in the studio, Ole Hansen on commodities. And yeah, I mean, to me, yet again, we have this profound supply risk in the crude oil market, the ongoing hormone straight situation, of course, but then this closure of the East-West pipeline, it looks like, at least according to what we were seeing yesterday, I haven't seen any updates of this, that this East-West pipeline notoriously, not notoriously, but notably, Saudi wants that hormone straight situation developed and crude oil couldn't get out that way. The bulk of their exports, they're able to route to the West through that pipeline for unloading on the Yanbu port on the Red Sea. And now we have the Houthis creating mayhem by establishing control over a couple of, I think, coastal areas. So, I think, that's a lot of money. I think, that's a lot of money. So, where are we? And, you know, I saw some headlines, Saudi needs to now export through Hormuz. Well, last I checked, Hormuz is still a problem. How close are we to something triggering even bigger concerns here? Well, we are getting closer, but what we are, we are seeing, and once again, is that how much is, or the big question is really how much is getting through the Strait of Hormuz. And I think the numbers that keep coming out are actually relatively high. So, you would imagine as well that Saudi Arabia will double down on the effort to get oil now back out through the Strait of Hormuz with the pipeline being potentially shot down for a number of weeks. So, we're not at crisis point, but every day the global market continues to tighten. The SPR releases from the U.S. has been the main contributor to the OECD release. Well, actually, the sole, because some of the others are starting to slowly restock. Japan is one of them. And according to reports, the expected time when the buyers who have, actually, the borrowers, because they're borrowing the oil, they're not buying it, they're borrowers of the oil, when they should start to lend it back to the government in the U.S. is by November. So, that will either have to be postponed or we'll continue to drain these inventories. So, yeah, we're in a market which is tight, crude oil. You imagine with all the stuff that's been thrown after the last few days, we should have been trading higher. We've been stopped at around the 110 level on Brent now three days in a row. And so, there seems to be some resistance coming in around that area. At the same time, we're clearly keeping an eye on the fuel product market because that's really where the stress is. We see the Russian export reductions. We see the refineries in the Middle East not being able to export at the rate that they did in the past. So, this is really where the pain is. We had diesel prices hitting record highs across Europe and I'm sure elsewhere as well. We are also hitting record highs in the U.S. And this is really where the pain into the economy comes from because it's anything from trucks, locomotives, ships. The cars, heavy machineries that all feed on diesel and it's adding to the cost and we're seeing that increasingly. So, it really leaves the Kevin Walsh and his team in a bit of a pickle with probably no way to go but hiking rates tomorrow, but we can talk about that later. So, this is the state. The fuel market remains exceptionally tight. We saw yesterday that there was some Trump was out saying that Russia and Ukraine had agreed to not attack each other. It's infrastructure. The comment from Ukraine to that was, hang on a second, we didn't know about that. Gas oil in Europe, which is the proxy for diesel, dropped 5% and almost reclaimed that loss in today's session. Yeah. These headlines on what somebody said about something in Ukraine, Russia, I'll always take with at least one or 500 grains of salt. Let's go over to the metals market because here we've pointed out in the past. This dynamic of rising oil prices were pressuring and rising bond yields were pressuring gold, for example, as a store of value. At times, we saw some immunity to that trade in gold prices managing to weather some of those same types of developments, but we're really getting locally here at least existential in terms of the support levels for gold. Do you agree that if we continue higher in yields, if we continue higher in the oil price, maybe there's growth concern? I don't know. Something is pressuring oil. And then the other metals, so copper, it posted that record high and then it came really tumbling off of that quite aggressively. It takes us through the metals complex, starting with gold and what you're seeing here in this key level. It survived its first test of support yesterday. What's up next year? Yeah, there's some parallels obviously between what's happening in industrial and precious because they're both responding to the macroeconomic outlook where basically higher funding costs potentially could happen. Yeah, I think that's a good point. I mean, I think that's a good point. I think that's a good point. At the same time, they're non-coupon, non-yielding assets. So when bond yields rise as much as they've been doing, the dollar strength as well in the last couple of days, we literally have a perfect storm of negative news. So it's with those glasses we have to look at the market. And yes, as you mentioned, John, we broke below 4,300 yesterday, bounced from 4,250-ish and holding around that 4,300 level. And I think that's actually a sign of some underlying strength because really it's difficult not to paint a picture that should indicate lower prices. And I think that is driven by the fact that yields are rising. That is actually potentially a concern from the fiscal debt situation. We have the geopolitical situation, which is, I would say, intensifying to a certain extent. We've had skirmishes on the East European borders in the last week or so. So generally, there is still a bit coming into the market from investors who are non-interest, interest rate sensitive. That's obviously central banks, but I think there's also other players involved here. So that basically leaves the question, what happens when some of these headwinds start to fade? What will then, what would be the next move? But that's for another day. For now, it is under pressure and we just basically need to see whether this support level can hold. Then you mentioned copper, as I mentioned as well. They are coming down for some of the same reason, but I think that then on top of that, we have two other main developments. Last week was the report that the White House was basically having a bit of a wobble on tariffs because of the affordability issues in the US, that there may not be a smart idea to increase costs to the US consumers more at this point in time. And that basically took quite a bit of a sting out of the rally. And we saw prices drop already last week. And then I think this whole AI. Yeah, I was going to say, I was wondering if the follow-up to yesterday might have been related to this anthropic story. Yeah. It's not a. It's only. It's just the fact that it has been such a. Yeah, it's just the fact that it has been such a. It's a theme that the investor has been buying into the copper because of the AI theme and the data centers and the increased demand. What if there is a slowdown in AI and rollout? What if there is a slowdown in the rollout of data centers? That potentially could obviously have an impact on demand for copper. So for now, it's more just the psychological impact of this discussion. I think that just added another layer of weakness into the market. But look out for the $14,000 level in London. I would say that's quite psychological. It's a key. We're just around that level now, perhaps just a bit below. So in the short term, there is some long liquidation coming in. And we come out of a situation where with the record highs we saw last week, that also led to a very elevated speculative long, which is now deflating. All right. And then I guess maybe to round it out, there doesn't seem to be a lot of reactivity through the grains on this. And we've talked about the grain story isn't necessarily the cleanest read on risks linked to El Nino. But we did get the latest reading. It rose. When I said latest reading, it's on this key area of the Pacific Ocean, which is like sort of the benchmark for how big this El Nino is going to be relative to past ones. Up two tenths of a degree, 2.9 degrees overall, warmer than I guess the baseline. And the record is three. And that record or the highs of the cycle usually come in the December timeframe or even later. So we're clearly headed for some kind of record here. Any follow through? And there's a lot of coverage of this. But is there any follow through yet? Any key and softs in the commodity space? - We take a bit of a, breather here and i think part of that is simply because we we've we i think we talked about it last week the the speculative long in grains and soft it just exploded uh in just three weeks there was just a massive amount of buying from hedge funds both in grains and in soft especially sugar and cotton on the soft side and then broadly when you look at grains and that basically means that we now have such a massive long that needs to be fed uh price supportive news in order not to to crack a bit and as we haven't really had any additional news in the last last week or so we've seen a bit of a tracement there are still some hope again russia ukraine that has been a key support for for wheat recently now we're entering into the harvest period for soybeans in the u.s and that seems to have some sort of few trouble problems there so that's actually underpinning prices um so all in all um a bit of a bit of a pause here but uh with i'll say the biggest worry in the short term is basically the the the the big long that's potentially weighing on prices if there is any change in the technical or the fundamental outlook in the short term all right thanks all for the run through and you mentioned the positioning and that is a huge positioning change i mentioned it yesterday and i passed along your coverage of the cut report on the fx front with this big move in dollar yen lower we saw those yen shorts essentially liquidated almost an all-in-one go and we've seen dollar yen backfilling with these this big new spike in yields even though japan or the japanese yen was holding out well against what traditionally would have been a very negative factor for the yen we did see dolly and backing up right to that key 155 level five level to the pip in fact yesterday i think i would suspect there might be some stops above there if we continue to test through this and i mentioned yields i want to go through the yield space a little bit i might as well round out the macro and fx picture picture before i circle back around to uh equities um so yeah we had of course this this big move uh you know yesterday at a times i was almost feeling physically scared this is kind of you know when you're used to looking at markets over the long period and you get these these multi-sigma moves over the space of a couple of days it just it's uncomfortable and the cost of money going up at this pace let me tell you this is this is serious stuff and there will be some kind of comeuppance here uh if these yields continue higher anything resembling the current pace but yesterday the action was pretty frothy we saw the two-year i want to say frothy that sounds like something being speculated to the upside of course this is a liquidation and selling in the case of bonds but the german two-year for example was up 13 basis points uh at one point yesterday and this is on top of you know these already very very large moves um and this was of course absorbing this saudi pipeline news and this this huge new spike in oil prices it did end of the day only up seven basis points so it looks like some kind of relief coming in there but a lot of that has been erased uh when i say a lot of that the uh decline yields uh we've seen the yields going back towards those highs again this morning but yesterday just an indicator of where the structurally things are looking here and what it might be telling us the two-year ended the day up seven basis points and the german 30-year uh actually ended the day down four basis points that bid at the long end is a very different story there and that suggests concern about long-term growth uh could also speak a little bit to germany being a bit of a safe haven within europe when you consider that uh the germany france yield spread so the 10-year yield spread which is usually the focus that one blew out to as much as 98 basis points that's a full 10 basis points above the prior uh high post the eurozone sovereign debt crisis of of 2010 to 2012 so you know this is these this is going to have consequences if these yields continue higher here so we need to all hope this stops and if it doesn't i think we'll continue to see some feed through into the future of the eurozone so i think we'll continue to see some feed through into uh headwinds for equity markets and for risk sentiment broadly on the u.s treasury front you know the obviously the massive headline here is that finally this 10-year the key 10-year benchmark crossing above that that minor high i said the five percent level i think there was one day it was 4.99 but there actually was a day where it's intraday went above 5.01 but we took that one out as well that was back in 2023 and trading at the highest levels the u.s tenure as we came in to it's really 5.04 percent it's the highest level since 2007. uh in the kicker we got to the whole bond market this morning was a late um story in japan i think it was hitting the wires just because of the late action and the jgb market suggested this was very late in the day uh some story i saw it on bloomberg i'm not sure of the source but it's out there you can find it as indicating that japan is considering a 3.5 percent of gdp and defense spending getting towards there over the next 10 years and we're going to see some of that in the next 10 years and we're going to see some of that in the next 10 years and we're going to see some of that in the next 10 years and we're going to this is adding insult to injury for the bond market and we've seen jgb yields coming in much more aggressively higher in fact the 10-year and 10-year jgb yield the benchmark 3.04 percent that is a new cycle high and therefore a new high since i'm forgetting is it 1996 we're talking 30-year highs here for japanese yields yeah and this is uh queuing all this up into the fomc tomorrow what is worse going to do how will he position a rate hike where they'll supposedly avoid forward guidance but this is the meeting where we get these dot plots and which i do think by the way an endangered species and these economic projections what kind of spend does the market take on this we're 92 percent price for the fomc hike we're more than priced for the boj hike is this some kind of inflection point um or is oil already seizing the narrative and market dynamics already seizing the narrative and there's not much that the central bank can do about it at this point that will be the key question i think over this fomc uh likely rate hike tomorrow very likely rate hike tomorrow of course the shocker is some kind of indication that this is supply side stuff and yes we're going to hike but you know some kind of skepticism around how much the more the economy can stand of this or something i don't know to me the dovish surprise scenario is the bigger surprise scenario even because it's so unlikely um and on the hawkish side are they going to outperform when they don't want to do forward guidance what is already priced into the forward curve which is for more hikes to come so it's yeah i think it's an event for as i've said before some of these big events are often about getting them out of the way so the market can get back to what it wants to do a little bit like the cbi it felt like the market had an agenda and even though we got a slightly hot figure uh we saw we saw some strange dynamics in the wake of last friday's cpi release so yes uh key stuff coming up here this bond market is going to be a market and uh oil markets and product markets as we'll emphasize are really critical here and as i've said i'm actually quite amazed how well the broader equity markets are managing here and it looks like the overlay yesterday was more about this anthropic announcement for sure than what is going on uh in u.s treasury markets so we had if we look at the you know top line headline how the big indices did it looked like a slightly negative day and it was about half a percent down in the end of the day and it was a little bit of a negative day and it was a little bit more in the s&p 500 a bit more in the nasdaq 100 with tech heavier overlay there minus 0.8 percent the equal weight though the equal weight 500 s&p 500 index was actually slightly positive on the day less than a tenth of a percent but still the median stock actually rose slightly on the day uh so it shows you how intense the selling was in the bigger names in the tech universe uh russell 2000 though was down slightly but uh the socks and here it is the uh the socks semiconductor index the philadelphia socks index down minus 5.9 percent on the day so clearly hardware uh ai related hardware suffering mightily on this anthropic announcement of hey let's consider a slowdown and then other key ai players chiming in with supportive comments overnight the vibe was a little bit less uh intensely a negative cost me was only down less than a percent uh in europe while down was down yesterday 4.3 percent from the top this is peanuts compared to the the backdrop of spiking energy prices spiking yields just think about back in the whole march episode and draw down from the outbreak of this iran war there was a chunky 12 percent drawdown in short order back then so again risk sentiment is absorbing this incredibly uh aggressively negative backdrop very very well so far all right now on to the sort of overlay of how the market absorbed this anthropic slowdown news we saw you know we saw trump out uh saying this is all a hoax and we can't slow down because we have to compete with china etc but the market was ignoring trump and listening to the signal which was from dario amadei and others in the industry so among the hyperscalers there was not a 100 clear pattern alphabet microsoft and meta were actually up on the day which was a negative day for markets again i suspect part of that is on you know they find this encouraging for these companies legacy business and maybe easing off a bit on the ending because it can compensate whereas maybe amazon and with that aws cloud services um part of their hyperscaling same for oracle being all about the hyperscaling those stocks reacted somewhat negatively or at least amazon was slightly in line oracle a bit negative on the day but clearly though the chip names as i mentioned and some of the hardware names very negatively affected everything from applied materials marvel technology those optical interconnect companies coherent and lumen phantom and then corning as well that fiber optic business all seeing very negative days the big winners were in software as a service for, you know, maybe obvious reasons, but it makes sense according to the narrative that if you slow down on AI and agentic AI, that means more room for software to continue to perform. I mean, you know, a slower path to disruption, the likes of Adobe, Salesforce, ServiceNow, et cetera. And the very most positive two stocks on the S&P 500 yesterday were, and this is along the lines of the supposed excuse and key. And, you know, obviously there's something to support this. The key for the slowdown being the angle of safety as well. Well, when you think safety, you think cybersecurity. And the two best gainers were CrowdStrike and Palo Alto Networks, both rising more than 13% in yesterday's session. Very impressive performance there. All right. And that is a wrap for today. There was some really good coverage of some of this anthropic angle of things. This one was passed along by Isabella Kaminska on X, a link to a LinkedIn post that itself is a roundup of some really interesting links on the whole, you know, discussing the open source versus closed source models. This is a little bit adjacent to, you know, some of the concerns that Anthropic has and whether this whole effort at a so-called slowdown is actually more about getting the regulator on board that, look, if you want us to continue this, you know, breakneck innovation, this is super costly stuff and we need to be protected in some kind of regulatory framework that vastly raises the barriers of entry to participating so that we're not disrupted by cheap Chinese models or others that are using open weights and then, you know, who knows, accusations of stealing our models, et cetera. So that's why I'm talking about this open weight versus the, and so-called open source versus the closed weight models. And then, you know, some of the conclusions are that everything really in the end, if AI is just, you know, everyone needs to pursue maximum AI because it's going to bring them something amazing, it always just reduces down to, well, you need the silicon and the horsepower to drive all these calculations. There could be some nuance though. There could be some ways that there could be a hell of a lot more efficiency. And there's some links, again, within this LinkedIn post to some articles. There's a really good one from Toby Nangle at the FT on SLMs versus LLMs, where he actually discusses an article we ourselves passed along some time back. What is this guy's name? Clement on Substack. Super interesting, though. I mean, things that I wasn't even aware of, that there are these AI routing services. It looks at the nature of your query and says, okay, this is a simple model. I can answer this. We don't need to go high end here. And it actually sort of routes your queries and your efforts to the appropriate level of AI model to anyone, obviously in order to save money. And then this whole idea of a potential shift to so-called sovereign AI, I've not really come across this expression before. The idea that's, for example, bigger players, and there's a super interesting example, by the way, somewhere in one of these articles, I think it was at the Toby Nangle piece as well, where he talks about some AI model coming up with some amazing answers to a super difficult math problem. And basically, there was an accusation from a math professor who was doing all of the work on this, that it may have just lifted all of his sessions and his interactions with an advanced AI, and essentially just stolen his work and made it public. Of course, this type of using your data is totally unacceptable to whether it's a large law firm, whether it's pharmaceutical companies doing extensive research, they need a closed environment, they cannot have their data being simply absorbed into an open or readily available model to others. So sovereign AI would be about a closed loop. It's not about AI per se, but it's about where the AI exists. And does that mean that they have to invest in their own capital, capital and intensive data center structures? What's the business model? I'm not sure I understand it myself. Could it be an external provider comes in that just they license that and they just make sure that it's closed loop within their premises? How does it work? But sovereign AI? Could that be a threat to these these big models like anthropic open and others as well? So just this, there's so much going on in the space. And I wanted to pass along, but I thought it was a pretty cool roundup post, which, in turn had some of these sub links. to other articles. So hope you find that useful. I will put the of course that in the podcast episode description. And super interesting days to me, given the backdrop, which I find very concerning of much higher yields, cycle highs and yields, in fact, and the momentum in those yields rising together with energy prices. I find it remarkable, I find it concerning, it makes me a bit, you know, obviously, conservative in terms of risk taking. To me, the market actually looks very aggressive in its own way. And I think it's a good thing. And I think it's a good thing that it's a lack of a bigger response to this. But let's see, maybe I'm too much of a worrywart. But in any case, I will not be available tomorrow. I'm traveling and not able to record a podcast tomorrow. But I should be back for a Thursday morning podcast from the road. And we'll see. And that's post of FOMC, of course. So it'll be interesting to see both what Warsh and company are saying as well as how the market is reacting to that. So stay careful out there as always. And we'll be back soon with the next 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 time.