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Market hoping for US-China comprehensive deal. Also, could gold's role shift from here?
Summary: Today we look at a rocky session for equities as geopolitical headlines spooked the market, which is trying to figure out whether the latest US threats are just chest thumping ahead of the key talks between the US and China kicking off tomorrow or a sign that trade tensions will escalate further. Also, plenty of single company news on earnings from Tesla, IBM and others, more fun and games for quantum computing stocks, key incoming data from Japan and the US that could spike FX volatility and more. Today's pod hosted by Saxo Global Head of Macro Strategy John J. Hardy.
Listen to the full episode now or follow the Saxo Market Call on your favorite podcast app.
Today’s Links
Is global auto industry ex-China about to seize up for lack of cheap chips?
This Netherland seizure of the Chinese chip-maker Nexperia may have been poorly thought through as the automobile industry outside of China may largely have to shut down if China continues its embargo on Nexperia exports from China. See this article from Bloomberg and this one from an industry news source - with hat-tip to the latest Doomberg substack for the latter link.
The next week likely represents the biggest event risk for geopolitics and markets for many months.
WSJ with some great perspective on the status of the US-China negotiations, as well as an analysis of both sides’ approaches and the risk of missteps. Would Trump go as far as declaring outright US opposition to Taiwan independence if China sweetens the deal sufficiently on rare earths, fentanyl and soybeans?
Read it five times and remember it: Leverage ETFs are not for investors.
Another one from WSJ - it is a really dumb idea to expose yourself to these leveraged ETFs for the longer term. If you are tempted, do yourself and favor and read this first.
China’s fourth plenum and mastering the universe and all that
George Magnus covers the outcome and policy declarations from China’s just wrapped Fourth Plenum.
Weekend read: general curiousity/dinosaur nerd edition
I always learned that dinosaurs were pretty much on their way out in the late Cretaceous when the big “Chicxulub” asteroid strike finally just finished them off. But apparently, there is some evidence that dinosaurs were thriving in some ecosystems all the way up to the Chicxulub event. And by the way, why do we even say that dinosaurs are extinct. They are all around us and are called birds - it’s just the biguns that the asteroid finished off. Although humans knocked off some pretty biguns themselves, including this one and this one.
Chart of the Day - VanEck Oil Services ETF (OIH)
This ETF (also available on many exchanges in a UCITS version) and a similar SPDR Oil & Gas Equipment & Services ETF (XES) saw a significant breakout yesterday on the resurgence in the oil price on the Trump administration’s moves against Russian oil majors and importers of Russian oil. Whether that is a sustainable source of further upside for prices is unknown, of course. What is known is that it takes a hell of a lot of expertise and money to discover new oil and to bring the existing oil out of the ground every year, and oil is very very cheap in real terms, with US gas even more so. Can this rub off on the oil services companies? This is a rather neglected area of the market in terms of investor interest and this ETF has a market cap of only a bit more than a billion USD. This is not a buy recommendation - just highlighting an interesting development.
Questions and comments, please!
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