Head of Commodity Strategy
Summary: The latest COT report for the week ending September 25 reveals a strong uptick in bullish sentiment on the part of leveraged funds. Demand was focussed on energy but buying was noted across most sectors.
The Brent crude oil rally to a new four-year high above $80.50/b attracted continued buying with the net-long rising 28,465 lots to 496,343 lots, an 18-week high but still well below the April record at 632,000 lots. The long-short ratio, meanwhile, jumped to a stretched 19.3 (longs per one short) on a combination of longs being added and the gross-short falling to a seven-year low. WTI, meanwhile, was sold for a third consecutive week.
Gold’s range bound behaviour around $1,200/oz attracted limited interest while silver shorts were covered as it began recovering from a multi-year low against gold. Platinum and copper both saw strong buying as industrial metals found a bid after China announced tax cuts and increased (infrastructure) spending.
Grains were bought on speculation that a worst case scenario may have been priced in by now. On Friday, however, the release of quarterly US stocks confirmed a continued challenging environment with soybeans and corn stocks both being higher than expected.
The sugar net-short jumped 62% after the early September recovery was completely reversed on bearish supply news out of India. Arabica coffee’s record short was cut by 3% in response to a recovering Brazilian real. On Friday the December contract closed at $1.0245/lb and above its 20-day moving average for the first time in more than three months.
AI: The good, the bad, and the bubble
While a deep recession may not be iminent thanks to central bank policy, interest rates will have to stay high for longer, and this will be accompanied by volatility risk from the unwinding of bubbles, especially within AI.
Steen Jakobsen,
Chief Investment Officer
The emergence of advanced AI systems is by far the most surprising event this year, turning everything upside down, while risks and benefits are debated. AI will also become an arms race between the US and China.
Peter Garnry,
Head of Equity Strategy
As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
Market Strategist
Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
Market Strategist
The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
Cryptocurrency Analyst
Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
Head of FX Strategy
While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
Head of Commodity Strategy
As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist
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