Deep Dive
Shownotes Transcript
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 host and guests and do not constitute investment advice or recommendations. All information provided is for educational and entertainment purposes only. Hello, everyone. It is Monday, 26th of May, 2025.
Lots going on since our last podcast from Friday morning. We had, of course, Trump out later in the day on Friday railing against Europe and the EU and the trade negotiations and lack of progress thereof.
as he threatened a 50% level on Europe to go into effect June 1st. Of course, here we are Monday, and we have the so-called taco trade. Trump always chickens out, right? So I think the idea here from Trump's point of view, not to make fun of him, but is to sort of inject some fresh energy into the situation, clearly frustrated with the lack of progress.
But last night we're seeing him announcing basically a delay of this threat for the July 9th date, which is that 90-day pause from the Liberation Day suspension that was announced back in early April. So again, just injecting some fresh energy. And of course, we're waking up here in Europe to much stronger markets, essentially erasing the big downdraft on Friday. Kind of makes you wonder if that's
The cycle of weakness in equities. We were talking about the risks of near-term weakness. We got some of that on Friday from an unanticipated source, a fresh Trump move there.
And by the way, I wrote an article on sort of one of the rules about trading and investing in the Trump era. If I remember to, I'll post a link to it in the podcast description. And one of the things I pointed out that I think is still true is that when things do get calmed and we do get the taco trade, Trump always chickening out and markets all go back to being in a hunky-dory shape, it gives Trump sort of renewed – emboldens him to make some
new trouble or new bold policy announcement and starts the whole cycle all over again. One of the things we've been highlighting last week was the U.S. Treasury market, the budget bill winding its way through Congress. We have it hitting the Senate now, and there's signs that parts of the Senate are not too happy with some of the provisions. Of course, the scale of the
deficit itself as well as the expanding the debt ceiling by, what was it, $5 trillion for the next two years. Seeing some complaints. So we're going to get some kind of editing of that bill. I don't think it'll be of significantly large scale to sort of shift the goalposts or alter the overall look and feel of where this is headed, which is, of course, to cement much larger U.S., not much larger, but still continue to very unacceptably large U.S. deficits. So
The U.S. Treasury market will remain a focus, but here we are on holiday today, so we have to see how things shape up as that bill passes or not and in what form and the Treasury market reaction around that. In the meantime, there's plenty of other headlines, plenty of other things to look at.
There was also, besides the 50% on EU threat on Friday, we had him, President Trump, weighing in against Apple specifically, singling it out and saying, look, we're going to put 25% tariffs on Apple iPhones. He clearly does not want them simply to pull up stakes out of China and move to India, but to get that iPhone production going on in the U.S. Apple's in a really ugly spot here.
How does it respond to something like this? Can you have the president singling out a single company for these tariffs? All important questions. Apple's stock is still down some 25% from its peak. That's relative to the NASDAQ having recovered all but the last 6% of its sell-off from its peak. So some really ugly relative performance from Apple.
Now, besides the focus on the Treasury market and whether this bill is going to pass in the U.S., when and in what form, we have NVIDIA reporting this week, Wednesday after the close. Really, I think the highlight of the week. I hope to get somebody in here to help us preview what the focus is there.
Among announcements from NVIDIA ahead of this earnings report, you have them announcing a new chip that just comes in under the – so they sort of throttle the performance of the Blackwell chip to some level that's acceptable for the U.S. export controls.
And what does it forecast in terms of the demand for that chip? And how much is that going to add into the mix on Wednesday? I still wonder, you know, is there the possibility that this data center investment cycle still has enough legs to gen up some fresh interest and some fresh speculative frenzy in the space? Don't know. I'm just putting out the question. I mean, after all, you've got the announcements of these enormous data centers.
While you've seen some cautionary notes, I think it was from Microsoft and a couple other spots. In the Middle East, you have Saudi and UAE announcing big new data center efforts. One of them is linked to that so-called Stargate initiative in Abu Dhabi in recent days.
So just interesting to see if this is going to either or. Is this an either or moment for sort of refreshing the whole AI momentum here? It does look really key technically as well. If you look at the NVIDIA chart, it's recovered quite a bit. It's been trading in a pretty narrow and nervous range here ahead of that earnings report. Now, in other sort of Trump executive order space, we have an interesting one for financial markets in this string of executive orders on nuclear energy markets.
Clearly wanting to make a splash there with the, and I think justifiably, I think this is actually a really key area for the future of our energy mix and humanity really and the climate as well. So these executive orders aimed at speeding up the reactor testing and expediting applications. The U.S. is horrifically bureaucratic in all kinds of things with permitting and applications and all kinds of infrastructure issues.
things that hold back infrastructure build out in the U.S., especially compared to a country like China where things just get done. The reactors could be placed on federal land. According to these executive orders, they want to overhaul the Nuclear Reactor Commission and encourage uranium mining and enrichment. So this is establishing a pretty clear agenda here.
But we do have a market reaction. So uranium, or the URA, the ETF that's linked to all things uranium, up 15% on Friday, a pretty big move. As our commodity strategist, Ola Hansen, will point out, we have to be careful because the implications for the immediate sort of demand for uranium is huge.
is well known way out into the future. So this is a marathon, not a sprint. Nonetheless, you can see some pretty big reactions in the short term in financial markets, that's for sure. All right, I think I'll get to the FX, what's going on FX at the end of the pod here. Just wanted to point out a couple of geopolitical things, trade things that I think are definitely of interest to
So besides, of course, Trump back and forth on EU and this so-called good call that was had with Ursula von der Leyen, is there some concern about, you know, as the UK – some of the hints were from the UK negotiations that some policy towards China is being hinted at. That is a key part of the terms that were finally agreed between the US and UK. And we still don't know all of those terms, by the way.
Is there a similar thing in play with the EU negotiations? There's the notion that the EU wants to kind of stand alone and be able to play both sides. Can it do so? But just totally separate to all this, we have –
out talking about that the EU is threatening to sort of walk away from a trade showdown with China over these EV levels. So EVs, they slapped huge tariffs on Chinese EVs, and I think they want to come to terms. It could look something like a minimum pricing because essentially China's
China can easily come in and we're seeing some latest news that BYD is completely slashing the prices for its EVs. These cars are easily on par with, if not better than, European EVs and EU simply can't compete if the notion is that they could compete on price and it will devastate the European auto industry.
So could it be that issue that actually ends up saving, from Trump's point of view, getting the EU on side with some sort of policy towards China? I don't know. I just find it an interesting separate issue. And then you see China sort of doubling down on some things that just look like trouble for a long term with the US-China rivalry. There was a
I saw it on Bloomberg. So China's government – this is a quote from the Bloomberg summary of the article. China's government is considering a new version of its, quote, Made in China 2025 campaign to boost production of high-end technological goods, prioritizing technology, including chip-making equipment. So that's quite obvious when it knows, of course, that –
that the U.S. is seeking to limit all things chip-related, and especially high-end chip-related, and China's access to that as a sort of national strategic policy.
And then it goes on to say, policymakers are preparing Beijing's next five-year plan, aiming to maintain the share of manufacturing and GDP at a stable level, which is completely crazy because the level of manufacturing in China is way too large, especially if we're transitioning to a world that is trying to recapture some of that manufacturing itself. So it just creates this notion that we're headed for a head-to-head confrontation on all of this.
The plans indicate that China will largely stick to its strategy of prioritizing manufacturing despite criticism from US and Europe, yada, yada, yada. So,
There we go on that. And at the same time, Trump chiming in in his own special way with reminding what the U.S. priority is. Quote from Trump, we're not looking to make sneakers and T-shirts. We want to make military equipment. We want to make big things. We want to make the AI thing with the computers. We are looking to do chips, computers, tanks, unquote. So there you have it, a world that is really set up for interesting things.
Our economic policy statecraft, I think, is our wonderful Michael Every. I want to say our. I would say the world's wonderful Michael Every would call it. So lines are getting clearer, but the market is certainly growing.
Not in fear mode over this, again, rallying back quite nicely overnight in the U.S. U.S. session closed today, but the futures were open and Europe essentially back to par. The racing Friday is a really big downdraft there. Now switching to my final note switcher on FX. So we have kind of an awkwardly timed move with this dollar extending to new lows when we have the U.S. closed. So what is the quality of this move? I'm not sure we'll fully know.
until we get through the Tuesday session in the U.S. to have a sense whether this dollar breakdown is continuing. We had Eurodollar trading above 114 for the first time in almost a month overnight. That move had stumbled a little bit before I started recording the podcast as well. Elsewhere, the dollar, a weakness broadening out a bit more. So we have Dollar Canada breaking down quite a bit lately. And Aussie dollar to new highs for the year.
And since December, above 65.15 at one point this morning, I think some of that encouraged by the Chinese renminbi being allowed to go to new highs versus the dollar. So we had dollar CNH down below 7.17 overnight.
But yeah, again, what's the quality of the move? A bit difficult here. It'd be very easy for reversal to set in and sort of throw some cold water on the dollar bearish case. I'd like to see this move hold and maybe extend a little bit into the Tuesday session in the U.S. And then I think we have potentially some new signs that dollar weakness could extend further from here.
And again, this is about the short term, whether this is the signal now or whether we just kind of get stuck in a range and a bit of a longer walk in the desert before the dollar bearish case is realized.
Yeah, and then so elsewhere in G10, the lone central bank with A rate decision this week is the RBNZ up on Wednesday, which is Tuesday night late for us here in Europe. And I think an interesting subplot for those that don't want to look at the major currencies, the Aussie Kiwi Cross recently rallying into a key area above 109, did not manage to penetrate that area. Could a bearish or sorry, a dovish RBNZ
change that plot or could the focus maybe on commodities or something else boost the Aussie in relative terms? I think that's maybe the interesting drama in relative terms for the Kiwi over this central bank meeting they're expected to cut. So let's see what happens there. And yeah, let's see what happens as we get into a full back to work mode tomorrow in the US. We'll be back with the next Saxo Market Call.