00:00We're once again dealing with a higher oil price, so 70 is where we trade on Brent up by just
00:04shy of 3%.
00:05We're already seeing that ripple through bond markets, slightly higher yields.
00:11How's that going to go down when it comes to the equity market session, do you think?
00:14Yeah, I mean, I think we're clearly heading in the wrong direction in terms of negotiations,
00:18and that's kind of been the bias in the past few weeks where you saw the oil price bottomed actually
00:23at the beginning of July.
00:24Now, I think what's changed is we've had material escalation in recent days with two very key points for markets.
00:30In that, the Strait of Hermuz is essentially closed again.
00:33There's no traffic really going through.
00:35And then the second point is oil infrastructure is being targeted again.
00:38And so the bias is clearly higher oil prices from here.
00:42I think maybe we don't get to the kind of $120 a barrel on Brent that we had previously
00:47because we know there are mitigating factors, demands being destroyed in terms of China's demanding less,
00:53but you also have supply going around Saudi Arabia.
00:55You have supply coming out of the U.S. from exports.
00:58But it's clearly a very worrying backdrop for equities when you also have these kind of wobbles within the tech
01:04trade,
01:04and that's a negative for growth when you have higher prices.
01:06Yes, and where does the wobbles in the tech trade leave us then?
01:10Because actually, Anthony was right to point to all the volatility we've seen in Korea
01:13and some of the other markets overnight.
01:15But actually, the Asia session looks overall quite calm compared to what we've become used to in other weeks.
01:22So we're down by three-tenths of one percent on MSCI Asia Pacific.
01:25U.S. futures look pretty flat.
01:28NASDAQ futures up a tenth of a percent.
01:29So where does that leave us in terms of sentiment around the tech trade?
01:32I think it's unsteady is the headline.
01:36What we've seen is that we know AI will be transformative
01:38and that there will be companies that will be hugely profitable on the back of that,
01:42but we don't know who the winners and losers will be.
01:44And no company has a monopoly, right?
01:46So you have huge amounts of spending,
01:48and the question is what companies will actually benefit from that on a return of investment perspective.
01:53And moonshot feeds directly into those worries that maybe U.S. companies won't be the ones to benefit.
01:58I think we've had some of the froth come out in that if you look at positioning in, say, leveraged
02:03ETFs,
02:03that's not at the peak, but we've been building for so long.
02:06It's been months and months that you've seen debt margin rising in the U.S.
02:09And in June, that number was 50 percent higher debt margin year on year than previously.
02:14And so while, you know, we're not having a turn from a more fundamental perspective
02:19in terms of we haven't seen negative earnings,
02:22that would mean you're more worried about a pop of the bubble.
02:25Certainly when you do get downside, because there's so much leverage,
02:28the worry is that it's quite big.
02:30We're going to hear a lot about U.S. big tech this week, aren't we?
02:33That's part of the earnings story.
02:34Then here in Europe, maybe proving the rotation trade is part of our narrative around earnings.
02:40So what are you watching for this week when it comes to the earnings drama, Skylar?
02:43Yes, I mean, the earnings is a really tough backdrop for these companies to compete on
02:47in terms of we had TSMC last week.
02:49It was very strong, and the stock was still down on the day.
02:52And I think it's a very high bar for that profitability to come in quite high for actually a rally.
02:59So I think you're just trying to get through without selling off significantly
03:02and making sure that you're not having that kind of peak
03:05and seeing what CapEx plans really look like is the important bit there.
03:09OK, Skylar, thank you very much.
03:10Skylar Montgomery-Koning with the latest on markets.
03:14And remember, you can find the markets live team.
03:16MLIV Go is the function to find Skylar and the rest of the team on the Bloomberg terminal.
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