00:00Mark, we have a futures picture for Europe that looks pretty positive, for the U.S. also looking pretty positive.
00:07And yet we cover day in, day out, it seems, headlines coming from Asia that talk about restrictions on daily
00:12life in some form
00:13to try and save energy, reduce demand, restrict access to energy products or as a result of restricted access.
00:20Is there some sort of global disconnect about the severity and immediacy of the impact that this energy crisis is
00:26going to have on the global economy, do you think?
00:30I think that's a great way to phrase the question, Anna. Good morning.
00:33I think that you're right that we are consumed at the moment with the headline trading to superficial marginal development,
00:41missing the fact that as Christian there in that clip outlined, we have a clear stagflationary impulse from this month,
00:48even if the straight gets opened up in the next week or two.
00:52By the way, I think there's very low probability of that happening.
00:54But even in that optimistic scenario, you still have a supply chain disruption.
00:59An energy shock, an inflation shock coming through.
01:02It's not just an energy, it's oil derivatives problems.
01:05So we still have a stagflationary impulse coming through.
01:09We have higher yields and a demand destruction.
01:11Now, how bad it is, is still in doubt.
01:13But we seem to be so consumed by trading the marginal, you know, truth social post from Donald Trump that
01:22we're not looking at the kind of the change in fundamentals.
01:25Overall, I'm seeing little particularly positive.
01:28Markets are trading more positive today than 24 hours ago.
01:31I don't see why I don't see anything that's particularly changed for the positive from a week ago.
01:37We've got more energy infrastructure damage.
01:40We've got the strait still largely closed.
01:43We have Iran asserting more control over it.
01:47And Trump even acknowledging that via his threats.
01:50And we have the U.S. trying to amass major troops for the weekend.
01:54Now, I don't know what they're going to do there.
01:56I don't know if they know what they're going to do.
01:57But certainly they're giving themselves the option of preparing for a major invasion, a major escalation.
02:03To me, everything is much worse than a week ago.
02:06And while it's already been a very, very bad month for global stocks, I am still very bearish today.
02:13Mark, do you expect much guilt market reaction to that U.K. inflation data?
02:17Obviously, it was pre-war.
02:19It came in bang in line with expectations.
02:21And yet you saw services inflation hotter than expected.
02:24In general, when you look at the yields picture, does the damage just get worse from here, given your pessimism
02:31on the war?
02:34I think, unfortunately, first of all, to answer the immediate question, you know, I don't think that inflation number matters
02:42too much.
02:42People are trading the war.
02:43In fact, everything is one trade at the moment.
02:45Sadly, it's just like what beta do you have to how oil trades?
02:48So everything is really an un-oil trade.
02:51But I do think it emphasized the picture that many nations had a high inflationary base before this stagflationary impulse.
02:58The dynamic we're trying to trade in rates markets is when does an inflationary impulse become more of a growth
03:03concerns as the disruption extends?
03:06I do think we're not yet in that phase yet because we don't know how high oil prices will go
03:11or how long that they're going to stay elevated.
03:14So I think unfortunately, I think rates will maybe overreact again.
03:18And I say that word overreact in the short end in terms they can spike again, even if we may
03:22not get all the hikes that get priced actually delivered in the market.
03:25But it really is all about oil.
03:27Above $105 a barrel in Brent, we're panicking again.
03:30Below $95, we're trading peace.
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