What Happened In Markets This Week: Oil's Spike, US CPI & US-China Trade Talks
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Hello and welcome back to the show and there's been a really big move in markets overnight which we will attempt to unpack and that is the oil prices soared 13% overnight.

And so we'll look at some of those headlines in regards to Israel having carried out a wave of strikes against Iran. And there's already been some retaliation from that. But we're not here to talk about politics. We're here to talk about how the markets reacted. And there's a couple of things here that we could definitely look to explain. And then also US CPI came in lower.

earlier this week. However, is that going to remain the case? Yet to be seen. The Fed meeting obviously looming, so we'll try and connect the dots and whether or not this emerging geopolitical situation might play into this as well. And then, of course, we've had US and China talking in London earlier this week. Where are we at? Why? Potentially on that event alone was the market reaction quite muted. And then finally, UK GDP.

We had a pretty heavy contraction in April. The economy shrunk 0.3% and there's been lots of negative media headlines if you live in the UK in regards to potential tax rises.

to fill the gap, so to speak, in the government's coffers. But FTSE is tapping on a record high. So go figure. And we'll also explain probably why that is happening. So, yeah, perhaps to start with, Piers, we had this big move in oil overnight. Israel has carried out a wave of strikes against Iran. Piers, obviously, always within that region about contagion effects.

and it being so significant for oil prices given it's the epicenter of where the main flow of crude comes from. In the Persian Gulf, you've got situated there Saudi Arabia, over the water Iran, but then also to the north, the likes of Iraq, Kuwait, and these comprise of pretty much the big four of OPEC. So yeah, what's your initial take when you see this sort of news flow?

Yeah, we were. I mean, we touched on this, I think, was it last week or the week before in the pod where you were asking me that question about geopolitical risk being a trader? Because oil at that point was trending lower and lower and lower. It's been trending lower all year. It broke below. When you look at like WTI crude, it broke below 60 bucks for the first time since like 2021. Yeah.

And, you know, it was all one way traffic to the downside. And you ask the question, you know, how do you deal with a downward trending market, but operating in a world where geopolitical risk is ever present? And, well, this is what's happened. And so, yeah, big, big, big spike to the upside, you know, as a result of what is now supply risk that has spiked dramatically.

as a result of this geopolitical situation. Yeah, on that supply risk side, I'm going to ask you to explain some terminology that people are probably reading in the news this morning, and that's about backwardation and then the opposite of that, contango. But before we explain those, maybe I could just explain how the news came out last night. Yeah. Because I think it's interesting, namely because my job is,

for those who are new to the channel was for a decade, I worked in real-time market surveillance, so to speak. Put simply, my job was me and my team had headsets like this, and we would sit there every second

of every waking hour bar Saturday when global markets are kind of shut. And our job was to relay looking at lots of different information services. So these could be major news terminals, but different feeds you can plug into. The idea being to have your finger right on the pulse of when things are emerging stories or data's breaking. So in this case, what I'm looking at in front of me here is a chart. And I've kind of put some...

some markups on here of how the news came out last night and you'll see there's a first little blip in price that came i think it was 44 minutes past midnight london time there's a little move there of about 25 cents where it touched the the kind of closing high on um the previous day

And what happened was the FT sources, so people familiar with the situation, reported that Israel's strike could come as soon as Friday. Now, when it comes to sources, you've got to ask yourself, well, what's the quality? What's the origination of this source? If the FT is reporting it, according to people familiar with the matter, well, that vetting process has been done for you.

So in this instance, when I was kind of monitoring this information, I'd get rumors from all sorts. You know, you'd have even have traders trying to get out of a position, call up the desk and say, oh, this is happening. And I'd be like, really?

So my point being is that if it's the FT, if it's the journal, these sorts of sources, they've done that due diligence. Otherwise, they themselves will land in a lot of trouble. So you can take that immediately as actionable information almost, that it's legit, point one, whether you trade or not would be the trader's discretion. And then what happened was, I think it was about maybe 18 minutes later,

And this is how the news breaks, because when you read about it in the morning, you kind of think, all right, this is the situation. There's been this attack and they've retaliated. But actually, it comes in much more piecemeal when you're following this overnight. And the first reports are of in Tehran of sirens going off.

and then reports of explosions. And at this point you're like, I don't know who's fired what. I don't know if it's an electrical fault on the grid system in Tehran. I don't know whether they've been attacked. So this is when you get those first little, you'll see on the chart as I'm showing, it starts to just edge up ever so slightly. And actually the move that went from 6850 to a high of 7250 is a pretty big move.

$4 move happened over about 15, 20 minutes as it just went higher and higher and higher. And one thing to say is that this happened UK time overnight. US traders aren't at their screens at this point. And that's the dissemination of news is radically different in an overnight APAC session than it would be during the middle of a major US trading day.

The kind of acceleration of that bid that came into oil would look like a direct straight line up if this was the middle of a U.S. session.

So this gives great kind of time opportunity if you are sat at the screen at that point in time. And then you have these other headlines that come. But one thing maybe I could ask you, I mean, this entire move, that was just, I've just spoken about the initial breaking headlines. The entire move was 13%. We went from 68.50 to basically 78, which is a big, big move, somewhat exacerbated by the

illiquid nature of the type of volumes that are traded overnight because prices have pared back almost two-thirds of that move going into the European Open. But one thing to ask you, Piers, on this is

You can see here, the market looks like it kind of goes in waves of momentum where it goes quite aggressively bid as the news breaks and then comes off almost two thirds. Then it rallies again, comes off again. Then it rallies again and comes off again. So tactically, how do you manage that situation when you're in it real time? With huge difficulty. I'd say you wake up the following morning, oil up 13%. Yeah.

Yeah, right. Obviously just bang went straight lined through the roof, but it's so noisy. And the, if you like the amplitude of that noise, that those kinds of wave patterns is monstrous. And the pullback you just mentioned, yeah, you can get multi-dollar pullbacks, even though it's going $13 up, that's the end point. You're getting multi-dollar pullbacks along the way.

And timing's everything. If you want to trade a move of this enormity, then timing of entry is really key. Often if you've missed it, so to speak, where you see it surge and spike up and you're not in, then this is where the emotions kick in because you're like, oh, damn it, I missed it. And then you kind of, that FOMO, so the fear of missing out,

You've seen it go and you're like, oh, damn it. I wish I was in. Son of a... I'm going to get in. And you inevitably kind of get in at the top of these surges because you think that that surge is that it's the one that's going to go $10 in a straight line, right? So you kind of get in, but you're late and then you just get killed on the pullback. But you're then long as the multi-dollar...

pullback begins and then you get really chopped up. And so ironically, I guess when the market rallies 13%, you could be not, you could be doing nothing but going long and you could lose a huge amount of money. So it really is super difficult. And this is where you've got to be super skilled. And as you're saying, it's about that, those early new, that FT report of sources and,

You know, that's where you that's where you want to be getting long. Right. Right at the very beginning of the sort of the news kind of narrative. And even if it's even if it ends up not being what EFT is reporting, you know, you just got it's like buying a lottery ticket. Right. You've got to be in it to win it. So if you get those sources, you're like, right, I'm in.

I'm in because now there's potential and often that potential doesn't come through, but every now and then it does. And you're positioned well, ready for the launch. And back to the quality of the source will give you that level of conviction on that, taking that higher risk strategy or not. One of the things that my colleague Emre sat to the side of me, he asked me when I came in was like, okay, so what would you look for next?

So again, just sticking with the very intraday news cycle basics and some good lessons to learn here. So what I was saying was, okay, so you come in now and Europe starts to wake up. So at six o'clock, you're seeing this for the first time. So sometimes you can see a bit of a sort of secondary reaction as this gets digested. But then it's about, okay, trying to think about

like a chess board. Well, what, who are the players within this game? Who are the potential, um, people who I need to monitor who could say something that could move the dial again, i.e. um, Israel, they've kind of said their piece Iran have, but what about other neighboring players in the region? What about the U S more specifically, just given their military presence and relationships within a situation? Um,

And then start to think about, okay, so geographically, well, things like key strategic choke points of the passage of crude oil

Whereas Iran potentially could be hugely disruptive in terms of, you mentioned supply. Well, if you look at coming out of that Persian Gulf, that Straits of Hormuz. So there you'd be watching now on your systems like a hawk, because if they were going to cause any real severe issues, that could be a key place to do so. So you kind of start trying to think ahead of time. Okay, so what could create then the next thing?

And obviously within your feeds, you'd be plugged in watching like lots of the Iranian information, lots of the Israeli information and trying to gauge accordingly. But going back to a takeaway on the learning point, one thing that the FT were talking about was this concept of backwardation. And I would assume that a lot of people listening probably have not heard of that. So I wonder if you could just give me like a really simple way of thinking about this.

Sure. And actually, this is a... Like, we talk about...

Backwardation, the opposite is contango. And right, we talk about this with regards to commodity prices, mainly, not just oil, right? And this is just thinking about what is the price, what we call the spot price. That's the price. Let's just talk oil. What's the spot price of oil? That is the price I would pay today for one physical barrel of oil, okay? That's the current price, if you like. But like,

Many users of energy, well, you know, and given the volatility, particularly of the price of oil, we, let's say, I don't know, and a good example would be an airline. If you're running a massive, if you're British Airways or whatever, you're running a big airline, other than your people costs, your biggest cost is fuel, right? Now, jet fuel is a component part of crude oil.

So the cost of jet fuel obviously is a function and correlated to the price of crude oil. But if crude oil is super volatile, how do you run a business if your biggest cost could go swinging up and down 20, 30, 40% in any moment? So this is where companies will use a strategy of locking in

future purchases of oil and locking in the price today so that they can be certain of what their outgoings are going to be and they can operate their business. And this is where they're using derivatives and they're using futures contracts to buy derivatives

Oil in one month's time or to buy oil and take delivery in two months' time or three months' time or six months or 12 months, right? And this is what we call the futures curve. It's what is the price of one month oil today? What's the price of two months? What's the price of 12 months, right? And there's a difference between the spot price, if I'm taking delivery today, and the futures price, right? And backwardation is the situation when...

The price of spot today is more expensive than the price of future oil. And this is theoretically very unusual. Theoretically, it doesn't make sense because if you're buying oil today, but you're taking delivery in one month, well, the person you're buying it off, that person has to store that oil.

for a whole month they may have to have costs like i don't know insurance on their warehouses for storing this stuff right so normally you get a contango situation where future prices are more expensive because of that storage cost and insurance cost and so on so backwardation is theoretically unusual and it'll happen when there's either a sudden short-term supply risk

Like right now, okay? This situation overnight has led to people being really concerned about Iranian crude supply. So if you suddenly get a chronic supply risk, people are prepared to pay a premium, an unusual premium for the spot price today because they're worried there won't be as much oil in the future, okay? You can also get backwardation for a sudden demand spike as well, which is...

you know less normal demand's pretty steady right so it's normally supply situation that leads to this so backwardation is that theoretically unusual situation where the spot price is higher i keep saying theoretically unusual because for the last five years or four years at least oil's been basically in backwardation so this isn't new even though the ft have jumped on it here this morning it's basically been in backwardation for four years but yeah that explains the situation

And for four years being, what, Russia, Ukraine? That's right. So really it kicked into backwardation when Russia invaded Ukraine. And obviously then there's been significant ramp-up in tensions in the Middle East with Israel, Gaza, now obviously Iran. So this heightened, what you'd describe as heightened geopolitical situation triggered from the...

Russia invasion of Ukraine has really set this backwardation situation in the market for the last four years. Okay. And to conclude then, something to look out for this weekend, the US and Iran had been scheduled to hold a sixth round of nuclear talks in Oman on Sunday. The US last night have already said they weren't involved with the attacks because one of the things would be...

a lot of tension between the US and Iran and whether the US was giving any sort of backing to Israel. They're distancing from that, as you would expect. So yeah, whether those talks go ahead, who knows at this point, so one to watch. It looks like not. I heard this morning that Iran have said they're not going. Which is, I think, unsurprising. Yeah, indeed. So let's talk CPI. Before this happened, that was probably one of the bigger data points. So what happened there?

Yeah, so U.S. inflation data reported yesterday. And look, these stories are linked, of course, because one of the key components of that inflation market is energy costs. And one thing that's been helping inflation kind of head a little bit lower, and actually, I think this report is the fourth in a row where we've had inflation reports.

announced lower than expected. And part of that story has been oil moving down, right? So now you're looking ahead and the data we got yesterday was for the month of May, right? Well, now people are going, wow, all right, well, what's June going to look like if oil prices remain elevated as a result of this? So anyway, that's for the future. This May report, again, as I said, fourth month in a row, lower than expected, exactly what we need.

When you're looking at the headline reading, it did go up, though, compared to April. So April was 2.3%, which was a fantastic report. That April reading was the lowest we've had since like 2021, basically, right? So 2.3% in April, and it rose to 2.4% in May. We had expected an increase to 2.5%, right? Yeah.

That's on the headline for core. It remained at 2.8%. So we've had three months in a row of 2.8% now. And again, that 2.8% is the lowest reading since 2021. So great news. And more importantly, great news, because yet again, here we are. We're kind of two months into the, you might say, the tariff period.

Post-liberation day, right? So the 2nd of April was Trump's tariff day. So we're two months in now and still...

There's absolutely no sign of inflationary pressures because of Trump's tariff risk. Okay. You said absolutely no sign. One thing I saw was, so the way of which the Fed is broken up, I'm assuming this is one of their more regional-based survey data points. So there's 12 reserve districts that would sit within the U.S. districts because...

US is so expansive that different geographies within the country are quite different in terms of the composition of their micro economies if you like and one of the things there was there was a survey of economic activity last week that showed prices advanced at a moderate pace across the US in recent weeks with some regions expecting future increases to be strong significant or substantial so

The other thing that I've also read is really two points. One, if I was talking in Stephen, our other kind of sister podcast show, he would say margin compressions or something like that, like businesses letting their margins shrink in hope that import duties might come back down or the buildup of infantry in advance of tariff hikes just might be contributing to a bit of a delayed pass-through effect.

into actually onto consumers. What do you think? Well, this is the problem because it's impossible to know. Yeah. So either, like if you're an optimist, glass half full, come on Fed, let's cut rates next week, then you're thinking that this is clear evidence that tariff policy is not inflationary. And who's the ultimate glass half full guy? Well, you know, I like my...

I like my vessel to be half full. And Donald Trump, I think, as well. You're probably implying. So, look, that's one side. But as you quite rightly say...

I don't know. Look, companies, right? So it could be working through pre-tariff inventories. So we've seen this. We're going to talk about UK GDP in a minute. We've seen this with kind of things like US import-export data, China import-export data. We know that in February and March, businesses loaded up, all right? They bought stuff and they packed their warehouses, knowing and worrying that

Prices would increase in April and May, right? So yeah, their warehouses are packed with stuff that they bought pre-tariffs. And so it could be they're selling that stuff at the same price. Now, you know how businesses work, you know, come on. If there's a little bit of extra margin there to juice, then you're going to take it, right? Wouldn't you increase your price a little bit?

Just eke out a little bit more profit because you can play on that tariff inflation story and blame tariffs. Yeah, sorry, customers. Look, we've had to increase prices. Tariffs are really squeezing our margins. No, they're not.

You bought stuff before tariffs. You're just eking out a bit more profit. I think you'd see evidence of that. Now, one thing in the basket that was the kit, there were three surprises where inflation prices didn't go up. Apparel, so clothing, actually declined 0.4%. I'd say you'd start to see some inflationary pressures there if it was happening, right? New and used car prices fell. And that's even though car makers have been saying they've had increased prices.

Smartphone prices are also down. So look, it could be the other thing, which is they're sacrificing margin to maintain and hold market share. I think there's more likelihood of that story. But again, it's impossible to know unless you literally went and knocked on the door of every single business and asked them straight out. And even then, would they own up and tell you? So it's impossible to know. So unfortunately, we're going to have to wait.

We're going to have to wait until we get June inflation and July inflation. And anyway, in the meantime, what's going to actually happen with tariffs? And obviously the China discussions and the European discussions with Trump are key in amongst that. So in the meantime, we can step back and we can say that, look, for now, you can chalk it up as another win. You know, we have May inflation data that shows no inflationary pressures. So you're kind of so far so good mindset, but...

Just thinking that tariffs could come through, it could be a delayed effect and then throw on the top, oil's just spiked 13%. So is this why then, we'll go on and talk about US and China in depth in a moment, but is this why Trump needs a win here in order to, the CPI data, the inflation metrics that you're mentioning are all kind of backward looking.

What he needs to manage, given the composition being largely surface-driven in the US, he just needs to keep the consumer spending and keep the consumer confident enough that despite all the negativity that they read about tariff, the potential impact and economic slowdown, as long as they keep going and feel confident. Yeah, absolutely. There's one other really big piece of the jigsaw in Trump's mind.

which is trying to lower his debt interest costs. They're going to have to refinance a trillion bucks basically in the next 12 months. And interest rates are really high. So he wants interest rates down, right? That requires inflation to come down, right?

Which means, you know, if you're Xi Jinping, you know this. Yeah, yeah. So, you know, when you're around that negotiating table, actually Xi Jinping's got some decent leverage, I would say, because he knows Trump's desperate. And actually the Fed are meeting next week. And obviously Trump's been super vocal about, in his criticism for Powell on social media. And it's hilarious in one respect and just quite...

mind-blowingly ridiculous in the other one. But like yesterday, he tweeted that Jerome Powell is a, quote, numbskull for refusing to cut rates, is what he said. He suggests that he may have to force something. That was Trump's comment. And there's been talk about

replacing Powell early. Powell's term ends next year, but there's been, every few weeks, Trump comes through with, right, let's look at some new candidates and threatening to remove Powell. I think that's, Trump thinks he's got leverage over Powell by A, criticizing him very vocally on social media and B, starting to threaten to remove him from office. I think Powell's immune to all of this. Trump's calling for a 100%

basis point cut next week. And if that were to happen, the US would save hundreds of billions of dollars in annual debt servicing costs. So if all you looked at were debt interest costs, of course you'd cut rates aggressively. The problem is you've got inflation, which is a bigger beast.

And ultimately, if you cut rates just to save yourself some cash on interest costs, but the side effect is inflation goes back up and gets out of control, well, then that inflation beast will be an overriding larger negative. So Powell's going to just...

continue to ignore Trump and likelihood they'll stay on hold and won't cut next week. But yeah, from an inflationary point of view, Trump's desperate for this stuff to come down. Yeah, and another Achilles heel is probably that midterms aren't

you know, not that far away. And I guess thinking about his political credibility as well. So yeah, it's interesting then. So let's convert this to what was happening in London between the US and China then. So, you know, they spoke for a number of days. China pledged to speed up shipments of rare earth metals, critical to US auto defense firms. Washington would ease some of his own export controls, allowing China

Chinese students back into US colleges, universities, things of that nature. But on those headlines earlier in the week, the first half of the week alone, the market was pretty uninterested, actually, despite the fact that they were talking. It seemed like fairly pragmatic.

sounding like, as you were describing, that Trump kind of needs to be like that. It's kind of the art of the deal in practice, I guess. We've gone out of the escalation phase into the negotiation phase. Right. Exactly. Yeah, markets hardly moved off the back of this news. And you're right, because we've started the negotiation phase, keyword started. And this 90-day grace period

That fetches us up in the middle of August, right? So we've got a couple of months here to go. And obviously, the art of the deal isn't just to concede everything on the first day of the negotiation. So this is like the very first step of what's going to be several rounds of negotiation. And what they want to try and do, and certainly both camps are incentivized,

to at least show they're making progress, right? And I think what you had here with those announcements on rare earths and then, okay, Chinese students, you can go to America. Yeah, that's like a couple of small little concessions, like the lowest hanging fruit, you might say, in this negotiation. And so markets like, yeah, fine, you know,

That's not more than what I was expecting. And so a bit of a non-event from a kind of market perspective. And it's more about, right, when are the next negotiation dates set?

And right, looking towards that and obviously comments between now and then, you know, dialogue's going to be going, carrying on in the background throughout, of course. So, yeah, we move on to the next phase of negotiation. Phase one, basically, I think phase one's tackled without any problems. I think the risk here was markets were going to sell off sharply if they came out of the meeting and it was, you know, really kind of acrimonious, then fine, markets would dump immediately.

But it wasn't. So markets maintain what is, don't forget, certainly looking at stocks, incredibly elevated levels. The S&P is back to its high almost. So, you know, there's the vulnerable, but the risk is to the downside here for stock markets. All the good stuff's priced in. OK, so the short term discussion that they had hasn't really moved markets. But has there been any pricing in of what to expect for the Fed?

Namely, we haven't talked about the dollar yet, and we spoke about that last week in terms of its weakness. So what's the situation there? Well, the dollar has continued to weaken, except for actually last night off the back of this Israel attack on Iran. The dollar did strengthen a touch. There's a little bit of safe haven stuff in there. But the dollar's eked out a small extra bit of weakness. But we move into next week.

Would say without a rate cut being expected But what we've seen in the options market is actually that you might say bearish positioning so that's where Traders are using options like put options for example to profit from the dollars value falling so positioning bearish positioning has reduced and actually it's reduced to the it's actually now a two-month low like translated

People, the bearishness on the dollar has peaked. People are now less bearish. Obviously, as the dollar moves lower and lower and lower and lower, obviously, you're going to start to get people saying, well, OK, I'm not bearish anymore because the downward move that I expected has now happened. Right. So in the options market, you're definitely seeing a shift in positioning back towards neutral.

People thinking, all right, maybe the dollar's fair valued here. So I think that's something to think about. Obviously, right, what's Powell going to say next week, you know, in terms of, you know, what guidance is he going to give us about maybe cutting rates end of July or September, for example? I think we're still currently priced for a September cut, aren't we? So, yeah, it was interesting in the options market just to see that swing back to a bit more of a neutral general positioning.

Okay, cool. Well, look, perhaps we can close with a quick word on the UK and mainly because GDP dropped 0.3% in April after what were some pretty good numbers we've been talking about in the last few weeks, the prior two months. April's figure was the first monthly contraction, for a bit of context, in six months.

and the largest since Labour won a landslide election victory last summer. This is, you've probably read if you're based in the UK, Rachel Reeves has been put under quite a bit of pressure here because weaker growth obviously is a headache when it comes to making money as a country, i.e. the government, and they might need to support their sizeable spending plans by just looking to increase taxes

And what people are looking ahead to is post-summer when we have the autumn budget. But all of that sounds incredibly negative, Piers. But the FTSE chart, I know, looks the complete opposite of that. So what's going on? New all-time highs, baby. That's what's going on. The FTSE has just broken the start of March peak chart.

It closed last night or yesterday afternoon, 8,884, making it officially the highest in its history. Now, there's a few weird things going on. Firstly, as you said, hang on, GDP worse than expected, contraction in April. So firstly, hang on, that doesn't make sense, does it? If the economy is losing momentum, why would the stock market be up? Well,

We knew it would be negative because the GDP figures for the preceding two months, February and March, were really strong. Why? Trump tariffs and stocking up. So we know that the UK exporters to the US had a great couple of months, February and March. So obviously then there's just a drop off.

I mean, activity in April. So you've really got to look at February, March and April, and I'd say May, all in one, and kind of average it all out, right? So it wasn't a surprise. You can really discount that negative GDP print entirely, right? But there's something else weird going on, because the pound has been strengthening. Now, that really is unusual. Normally, the FTSE 100 likes a weakening pound, right?

Why? Because it's packed full of global international companies that generate revenues from all over the planet.

In which case, if your domestic currency, the pound, is weak, well then let's say revenue you're generating in dollars in the US, well when you repatriate that money, your dollar buys you more pounds, right? So actually, exporters benefit from a weak domestic currency. But the domestic currency has been really strong, like really strong, and yet the FTSE 100 has gone and made a new all-time high, which makes this rally all the more impressive.

It's the whole kind of rotating out of the US into Europe play is definitely helping. And also, you've got to think about the FTSE is really cheap on a P/E ratio perspective. So the P/E ratio, even though it's made an annual time high, is still only 16.7 times earnings, price to earnings ratio. The S&P is 26 times for context.

The makeup of the index is very different. And you'll often see people describe the FTSE 100 as an inflation resilient index. So obviously as inflation remains stable,

preventing the central banks from cutting rates, actually the FTSE is a good place to be because financials is the biggest sector. 23% of the FTSE 100 is financials. And actually financials benefit from that kind of interest rate spread being wide. That means their loan books can generate more revenues, right? And then the next biggest sector in the index is consumer staples, right?

17%. And then the next one's healthcare, 11%. So you'd say they're all quite, or certainly consumer staples and healthcare are quite defensive. So in this mood where we've got tariff risk and uncertainty and maybe global growth slowing, then the FTSE is a good place. And then the fourth one is energy. So energy's just spiked, which obviously has now helped the FTSE. So you got, you got the, it's an interesting, a fairly unusual index because tech is,

There's hardly any tech in the FTSE 100, which is so rare for a kind of major sort of national index. Like in the S&P 500, tech is the biggest sector at 30%. So there are your big differences. But yeah, FTSE all-time high, despite a really strong market

pound sterling is incredibly unusual but maybe yeah there's a couple of reasons why it sounds like the perfect circumstances for the fussy to thrive but long term not having any technology exposure is this why so this is the principle of diversification right from a geography perspective sector exposure i think if you've been massively overweight tech for the last

If you've been massively overweight US tech for the last 15 years, well, well done you. It's been phenomenal, right? But if you think that US tech or the US exceptionalism story is over and you want to now diversify your portfolio and you want to diversify it geographically and from a sort of sector weighting perspective, then the FTSE 100 is your perfect destination because you get a slice of Europe and

You get a much different sector mix. And yeah, that's why I think you've seen... But look, the DAX made a new all-time high last week as well, right? It's not just...

the footsie here in Europe that's breaking new levels. I was listening to a show this morning and they were talking about the spread between in Europe what's seen as the benchmark, the 10-year German yield and the spread against other what were peripheral pig nations, the Portugals, Greece. And actually some of them are the most tightest levels. I think the Greece one is like 0.7%, which is actually the most narrow that spread's been.

basically, I think, since the bailout. That's right. And that is because those peripheral economies, having gone through like desperately harsh austerity measures through the 2010s, right, for a decade, really their economies are now in fantastic shape post-COVID, right? Their debt levels were much lower because they were forced to reduce debt in the decade preceding COVID, right?

So actually, they're in better shape now and their economies are performing really, really strongly. You can check out Spain's economy is awesome at the moment. And so for those reasons, yeah, you're seeing that kind of that old what feels like old school sort of, you know, government debt risk for peripheral nations. It's just kind of a thing of the past here. And that's why those and you should also add Germany is about to significantly step up fiscal spending.

So Germany's about to load up its debt. And so actually you've got to think the German yields are rising as well as that convergence of yields is a two-way thing. There's two sides to that story, both forcing that convergence. Cool. All right. Well, look, we'll wrap it up there. So, Piers, thank you as ever. Wish everyone a great weekend ahead, and we'll see you next week. Have a great weekend.