Morning Macro 8th October
Gold breaks above $4,000 (now $4,030) though with an RSI at 91 it’s extremely overbought, when the correction comes it will be aggressive, but palladium has now joined the precious metal party, rising +8.9% in 3 days (Chart 1, Bloomberg).
The problem for 2026 isn’t recession, stagflation or debasement, it is electricity generation…The next gen data centres will be so powerful as to need their own power grid; indeed, authorities may even require that they do not draw on the national power grid for fear of crowding out home users. There is already a view that supply will be in deficit for 2026. The OpenAI deals announced require huge levels of both capital and electricity to fulfil. These may be unobtainable but nevertheless, electricity is the variable that will become more valuable. In the meantime, watch power grid ETFs because it is likely there may be a correction to the amazing surge in the chipmaker and AI sector. (LinkedIn Neale Muston)
And yet more weak data from German this morning with Industrial production down 4.3% MoM (est -1.0%,) (Chart 2, Bloomberg). The German industrial production chart back to 1992 highlights the ECB’s problems, the OIS pricing just 10bp cuts from the ECB over the next 12 months seems too low, especially with the FED OIS pricing 102bp of cuts. EURUSD seems rich at these levels.
AMD SOARS 38% ON OPENAI DEAL, ADDING $101 BILLION IN VALUE
AMD IS NOW UP 160% OVER THE LAST 6 MONTHS
Meanwhile Japan has clearly decided to sacrifice the currency to save the bond market with the Yen -3.3% since the election result while the 30-year bond yield returning to unchanged.
The S&P 500 has never been more concentrated in just three stocks than it is today with Nvidia, Microsoft, and Apple representing over 21% of the index.
Oracle shares tumbled after a report that the software maker’s profit margin in its cloud computing business is lower than many on Wall Street have been estimating.
Carlyle Group is releasing its own estimates of US economic data. The investment manager is stepping into the economic data void left by the US government shutdown with a grim read on the U.S. labour market. They estimate that just 17,000 jobs were created, among the weakest results since the US economy emerged from the 2020 recession.
Consumers see higher inflation in the year ahead, with signs that lower and middle-income households are feeling most of the burden of rising price pressures, according to a monthly survey from the Federal Reserve Bank of New York. Expectations for consumer price increases one year ahead jumped to 3.4% in September from 3.2% in the prior month.
The RBNZ cut by another 0.5% to 2.5%, citing “prolonged spare capacity”. Guidance was dovish with the OIS pricing another 25bp cut at the Nov 26th meeting. RBNZ has now cut by more than other major central banks, as it overdid the tightening.
