Bracing for Liberation Day
22:57 Share

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.

All right, here we are. It's Tuesday, April 1st, 2025. I'm in the studio here back in Denmark with you, Ole Henson, on Commodities. Welcome, sir. Thank you very much. It is April Fool's. Unfortunately, you couldn't come up with any good jokes, and I couldn't either. But I think in this day and age, it feels like almost every day could be April Fool's. But let's have a look at what's going on in markets. We saw an extension, pretty viciously so, of the sell-off yesterday.

You know, the one that's been kind of going on since last week and we got the sense that these tariffs are going to come, that weird little episode we had of Trump seemingly soft peddling what was going to happen, that the reciprocal tariffs wouldn't be as bad as many thought perhaps. That was thoroughly evaporated with the news over the weekend and we're all waiting for so-called Liberation Day tomorrow.

Did have a comeback yesterday, however, from the lows of the session. Pretty quickly came back from early in the U.S. session. Hard to know what to do with this move. You know, on the one hand, new lows that are quite heavily rejected can look kind of positive. But it was end of month, end of quarter, end of the Japanese financial year. And we don't have yet this big event risk out of the way. So I think we just need to sort of

See what happens. And I've put on the chart, I put the chart there on slide two for the NASDAQ 100 index. You can find the link to the slide deck in the podcast description. And I think last week showing us that that 200 day moving average has been the right indicator to indicate where we are with this market was sort of the exact high really.

of the comeback from the prior lows before we posted some minor lows below 19,000 yesterday. And if we do resume selling, I think the next levels to look at would be the 38.2% retracement of the entire rally sequence since that 2022 low. And it was a big one. So a 38.2% retracement is down in the – I can't actually see the number there on the screen –

It's in the low 17,000s, 17,200 or 300 or something like that. And then I put in a bear market status, which would be why those two figures are overlapping. 20% correction from the top would be something like 17,775.

So some levels to look at to the downside if we are going to continue selling. And of course, NASDAQ 100 has a higher beta than the S&P 500. So you wouldn't be in a bear market yet for the broader market if we're seeing a 20% correction in the NASDAQ 100 in all likelihood. So yeah, we're all waiting for tomorrow's news. We can cover it when we get there. There's a pretty good projection we have in the appendix.

One of the later slides, I'll get to that number later, but the appendix with all the links, must reads, et cetera, from Trendnomics, looking at some proposed, you know, what the levels might be of all these different tariffs that are set to be announced tomorrow, as well as noting some of the retaliatory things that have already been implemented.

And on that retaliatory front, as we put in the bullet points there on slide two, EU is said to be readying so-called anti-coercion instrument in response to US tariffs. So it does look like the EU and the US are at a pretty strong risk of getting involved in a

sort of escalation in a retaliatory trade showdown here if they follow through on these threats. And didn't we see yesterday, John, that in Asia, China, Japan, and South Korea also were preparing some kind of a united front? And

That sounds so odd when you say that. It sounded so odd to Michael Every, our guru on all things geopolitical these days, that he said it must be some kind of misprint. So I didn't want to pass that on because I want to figure out what they mean by that before believing that China and Japan are going to team up together on anything. But if that's the case, that obviously just highlights the seriousness of the matter. Exactly.

And single stock developments, Meta breaking below the 200-day moving average yesterday and falling through quite a bit, but then rallying and closing right on that level. So it was the last of the MAG7 to be a holdout on that 200-day moving average. A very interesting technical setup there. And political news. Yeah, go ahead. Sorry, actually, on the 200-day moving, I was just looking at them, John, and yeah, it is quite significant because if you look at some of the other markets,

Nvidia is 18% below Alphabet, 13% below Tesla, 11% below 200-day moving average. So it's really been… Microsoft has been one of the worst performers. Yeah, and so really, Meta is almost the last one standing among this group of sevens. Although no longer standing. They are also critically… Small down on the year now, yeah. Critically, at least it broke a critical level. It can't get back above it. Although I think Amazon went back and forth over these 200-day moving

average. It's not a magic level. It's just an important demarcation point often for single stocks. And political news we have in France, Le Pen being banned from running for political office for five years. She could even serve jail time once she exhausts all sort of legal avenues or legal recourse avenues for getting rid of that or for overturning that sentence. Yeah. Trump already weighing in on that. It does look a little bit suspicious in terms of the

the relative focus on populace across Europe. Let's see what happens there. U.S. Treasury yield back lower. We saw yields backing up a bit yesterday, but closing towards the recent lows, 4.19% to the last I looked at the chart. Should be supporting a stronger yen. The yen has rallied, but it's underperforming where we should be. I've got some more thoughts on that in a moment. And then in your space, gold really exploding higher.

I'm sure we'll talk about that. Overnight, the RBA standing pat at 4.1%, not much of a market reaction as they are seen likely to cut at least twice this year as priced in. I think I agree with those saying there'll probably be at least three times that they'll cut this year.

In FX, not a whole lot going on. You can see the overview there on slide three. Dollar has come back a little bit. We're starting to see it tilting higher against the Canadian dollar. So you can see the big highlights in dollar Canada and the Kiwi versus the U.S. dollar. Risk slipping into a positive trend for the U.S. dollar if we close at current levels. Aussie dollar already did so. It already flopped over.

just showing that this risk off is, I think, impacting those smaller currencies. Although with the fiscal focus in Europe, as we have noted, the Swedish and Norwegian kronas have done very, very well indeed. And standing above everything else, though, is the huge move in gold with silver just not able to sort of stitch together a consistent bid here.

And as I show on slide four, dollar-yen, yes, we've sort of rounded off and come back lower after touching this really key 151 area. It was a prior low and then a resistance point, and it's just below the 200-day moving average. But if you look at where U.S. 10-year yields are, a really critical indicator at most turning points for the currency pair, you would think it would be more like 148, the figure, or maybe even a bit lower.

But it's not down there. And again, I don't know if this is some of the end of the financial year effects coming into play here, U.S. tariffs. We won't know the lay of the land, I think, until at least for the near term post the Liberation Day tariff announcements from Trump tomorrow.

And end of quarter. Ole, I guess it's a good time to round up what we're seeing across the commodity space. I would have thought that gold would stand towering above everything else for the quarter, but it's one thing to see gold at all-time highs and silver not, but the quarterly performance is quite remarkable there. It is indeed. We're on slide five, by the way. Exactly, yeah, John. Well, commodities most certainly has outshone most other asset classes, if not the

If not sitting on top, I haven't really just checked it through. But we got the Bloomberg Commodity Index gaining almost 9% this quarter. Only the grain sector is underwater. Ample supply and tariff threats to U.S. exports and so on is probably playing its part there. But, yes, as you mentioned, we got gold and silver up both around 18%.

But even something like that, but then we have natural gas, copper and coffee even doing better. So, yeah, very, very strong, strong broad performances this quarter. Just worth noting as well on this table I put in here that the EU gas price, which was down 70%, and cocoa prices, which actually lost a third, they are not including in the index. So they are not pulling it down. They would have done, obviously, if they were part of it.

But you mentioned gold, and it is really the one thing that the market is focusing on right now when it comes to commodities. Crude oil, coming to that in a sec, but just look at that on, look at the performance on slide six.

We just come out of a quarter where basically it was the best quarterly performance since 1986. Wow. I remember that clearly. I'm sure there's many of our listeners who doesn't. I don't. I was barely a teenager. And it's just phenomenal. And I think what is even more crazy, if you look on the right-hand side there, I'm not a massive technical analysis buff, but this cup and handle that it's showing there,

the two red marks, first the deep cup and then we had the handle and then we had the breakout. That cup and handle formation took more than 13 years to create but the target which was basically triggered when we broke above that 2075 level last year, the target was reached within a year and that was basically 3100 where we are trading above right now. So

Just based on that, you would imagine that we would run into some kind of consolidation sooner or later. It feels to me like, and I guess that is 100% extension. So the magnet, sort of like a head and shoulders formation, I guess, it's the size of the extension is meant to be the size of the original cup. Yeah, from the bottom of the cup to the top of the handle. So yeah, it remains to be seen, but...

I suppose in the very short term, if the tariffs that are being rolled out on Wednesday do not turn out to be as punitive or as tough as expected, then perhaps we could run into some profit-taking. But generally, I think this kind of move we're seeing recently, this is not private investors. This is not small investor-driven because as an investor, you would –

You'd not be buying into 3,000 plus gain without having had any correction. So I think this is real money that's going into the market. It is asset managers. We're seeing that through ETF flows on the rise. Central banks continue to buy into it. We've seen a drop in yields, the worries about the fiscal debt. So...

The reasons for buying gold are multiple. And as we have talked about before, again, when you're buying a piece of metal that doesn't give you anything apart from the potential hope that it will be trading at a higher price sometime in the future and it will protect you from inflation and other mishaps, then it does obviously indicate we are in a world right now where there's a lot of uncertainty. Yeah, I mean, we're also looking – we all know this advent of this Trump administration in the U.S.,

clearly transforming its role in the world and moving away from just being used as a tool

or the dollar being used as a global reserve currency, and the US having been, at least the US middle class and productive sectors, but having been the quote unquote victim of mercantilist approaches of these other great powers in the world, or large powers to great powers in the case of China. So it's an insurance policy against this new world order. It's an insurance policy against, as you mentioned, the debt levels and the knowledge and the certainty that to unwind the real value of that debt will require some form of financial repression. So owning bonds means...

Yeah, perhaps in the near term, you can get some positive real yields. But eventually, these real positive real yields will not be possible. And, you know, eventually, that could mean something like capital controls in this new world to prevent capital from fleeing financial repression, etc. So

This gold move, as you said, it is of a secular nature. Of course, we don't know whether it could suddenly become technical, but there's every chance that this just continues to grind and grind and grind as the great powers seek to diversify from the types of risks that we just – and the laundry list of risks that we just ran through there. And actually, if I just may finish that, I actually read a great comment yesterday on Bloomberg, someone in the Market Life section basically saying,

Unlike sovereign bonds, which can be politically sensitive, or foreign currencies, which are based on trade relationships and alliances, the precious metal is politically neutral. Universally recognized as entirely unlinked to any one country's creditworthiness. And that's basically, I think that basically says it all in the kind of situation we're in right now. And in the short term, gold can easily correct $100. It wouldn't change a thing. I would start to get a little bit worried if we break below $29.50, which is obviously still quite a

quite a deep correction from where we are right now. But 29.50 is really as far as we need to drop before we can start to get a little bit concerned that we may have seen a short-term peak in the market. Yeah, and you wonder if also Liberation Day, quote-unquote, is some sort of stop-and-take note or stop-and-take stock moment for gold. Who knows? We just know that there are reasons for this to continue. The question is at what pace.

Crude oil. We have not had an update from you for a bit here. What's going on? Where are we with Trump's attempts to keep prices low? Failing, I would say, quite clearly.

Lower prices will kill production, and it's as simple as that. So it's not a viable option because at the same time, Trump wants to protect the U.S. oil industry, and they have clearly stated in their latest statement

A survey that came out from the Dallas Fed last week that they need 65 bucks to even consider making new production. And that's more or less where we are. And that's a spot price. And if you look at where the WTI is trading a few years down the line, then it's closer to 60. And that basis does not make it a variable option to increase production. So instead...

We've seen a bounce back. We're back more or less to the middle of this range where we see prices behave or trade this year. We are back to 75 in Brent. And the focus really has turned from the potential damaging impact on the

on demand from a global trade war towards the supply side where we're seeing several initiatives against US initiatives both on Iran, Venezuela but recently also Russia, the secondary tariffs on Venezuelan buyers of oil and on buyers of Russian oil. At the same time, I think we are seeing a growing political uncertainty

a growing risk of some kind of conflict between Iran and the US, obviously way too early to say. - There's been a lot of news on that front of these B-2 bombers flights, very large numbers of them gathering in this Diego Garcia Island in I guess it's the Southern Indian Ocean. - Yeah, exactly. - Within striking distance of Iran. - So it's one we should be watching out. So right now, the market's not bouncing because we think it's happy days, demand is strong enough.

It's simply a question that the supply side is equally challenged. So that's what we are responding to. You can also argue in the U.S. that inventory levels

Both crude and something like diesel is relatively low for this time of year, and that's also supporting WTI. We've seen some of the time spreads there being fairly tight. So generally, the oil market is, from a price perspective, is in a relatively good space right now. But from a fundamental perspective, it's still all up in the air with uncertainties on both sides.

And if we should just finish off the commodity space, John, there's obviously been a lot of focus on copper recently with this market trying to price in what the eventual tariff level will end at. We've seen markets come down, but actually it hasn't really moved the discount or premium, the spread basically between London and New York. It's still around 15%. Basically, that's where the market is pricing in the tariffs to end up. So still, remember, we have a potential market

big reaction in the market when and if these tariffs are being announced because if it's 25 New York will surge higher relative to London if it's less then yeah you know what happened so it's still in a bit of a flux and obviously we're also waiting to see whether there be any tariffs on something like silver and platinum which also could have an impact Wow

Okay, the macro calendar highlights are on slide eight. We have Flash CPI out of Eurozone, which is actually already in the review mirror. Maybe you can check that over while we're talking here since we forgot to check as we were starting the podcast, which is about when it came out. ISM manufacturing is up today. This is not normally a market-moving event. The jolts, unfairly so, is often a market-moving event if it's a big surprise. Very poor survey quality there in terms of the percentage that respond the first time around.

But it is all about the Liberation Day tariff announcements tomorrow and things like what we're saying is how big will they be. And there's this story over the weekend that perhaps Trump is saying he perhaps he'd like to go with something big and broad and simple rather than the more narrow reciprocal tariffs that are done case by case.

Leaving us all really up for grabs as to what is actually announced, except that we know something rather large and significant will be announced. There's a good stab at estimating what will be announced, however, that I've got a link to in the appendix section that follows. I'll get to that in a second. Rest of the week, I wonder, I think the impact of these tariffs is something, and there'll be response and back and forth going on and on.

This is a long-term deal, as well as all the front-running that has happened ahead of all these tariffs, and what is the risk of a cliff dive in some level of activity for those that have locked in a full year of supplies or whatever they've done to front-run all these tariff measures. This is, in other words, it's a slow rolling thunder kind of situation here, whereas incoming data is often not, and the market has to adjust quickly to that. So we could quickly sort of

segue into response, heavily responses, heavy responses to U.S. incoming economic data. And the first data on that front is the ISM services on Thursday. Again, erratic survey. I just don't understand the quality of this. And then the jobs report on Friday, probably the first really critical one.

Well, the ECB will certainly still stay on course to cut rates further. The inflation number came out 2.2, more or less in line with expected, but the core dropped to 2.4 from 2.6, and that was a bigger drop than expected. So they're both pointing in direction towards 2%, which will obviously leave the ECB room for maneuver. Yeah, and as we've talked about, we do have this prospect for massive German fiscal. It is growth positive, euro positive for the long term.

But this type of spending takes a lot of time to put together and get mobilized, whereas some of these tariff impacts could mean in the near term, next couple of quarters, we could be seeing some weakness across the European economy. Again, on what tariffs could be announced, there's a good stab at what those could be on slide nine. You can see the link to – it's the third link I've provided, the tariff projection overview from TRIN, TRINomics.com.

I think Europe is really set for a big blast here because of those VAT rules, also because Trump is a renowned disliker of all things Europe. And so is J.D. Vance, for that matter, after we saw in the various chats as they were discussing an attack on the Houthis that was embarrassingly revealed by The Atlantic magazine.

et cetera. So have a look at that. Of course, we'll cover things once we know the shape of this, perhaps as soon as Thursday. By the way, I was looking as you were talking, Ole, on what time the announcements might come tomorrow.

It says there's no exact time, but it will be in the president's first Rose Garden press conference of this second term. His members of cabinet should be in attendance, and it typically occurs, these Rose Garden events, in the late morning or early afternoon U.S. Eastern time. So add however many hours you need to to adjust to that. In the case of Europe, that would be adding six hours to that time frame.

Other links on the must reads and listens. There is an interesting tweet from a not suitable for work X account, a very opinionated fellow. I don't endorse everything he says, but he is a very interesting follow. You can see the link there. He passed on a comment that was very interesting on productivity and getting people

so incredibly high among some people in the mag seven space in the tech space that there could be, uh, many people could be at the risk of redundancies if we're supposed to read something into what he is passing along there. There's also a long form interview on macro voices.com on the state of AI with Matt Berry and entrepreneurs. Some really interesting points on that one, especially, uh,

Things like these potential AI service agents coming about in the next year to two years, also meaning, I would say, the risk of

many service workers' jobs, but also things like the infinitely patient and empathetic agent that is helping you out with your customer service needs and knows your entire account history before it even talks to you and can take all the questions you want without being rushed into servicing the next customer. Many other points there. I haven't even listened to the entire interview, but it was a very interesting one.

And you should always follow Michael Every on X as well. He does a little daily news roundup. Have a look at that. Yeah, so Liberation Day tomorrow. Ola and we'll see what the lay of the land is after we get those announcements. And we'll be back very soon to cover what's been said there and see how things stand with the next Saxo Market Call.