James Brodie
Head of Learning & Development, Flux
US Equities Fall, Glencore Sells 40% Stake, German 30-yr Yield
Strong US data lifts yields and USD, cuts look overpriced. Equities wobble led by tech, commodities rebound, freight tight, risk signals
Consistently stronger data suggest U.S. rates should be higher, next Fed governor Warsh will have trouble cutting rates and the 47bp of cuts priced by the OIS market for 2026 looks too much.
With just 3bp cuts priced by the ECB this looks too skinny. U.S. yields will move higher, dollar higher, EURUSD lower. (Chart 1, US economic surprise index vs US 2 yr yield, Bloomberg)
US Equities fall dragged by software stocks (Nasdaq -1.6%) while commodities bounce again (gold +2.5%, silver +5.9%, uranium +5.5%). U.S stocks show a rare defensive signal, Consumer Staples were up over 1.5% yesterday, technology was down over -3% at one point today. While Chipotle stock falls -11% after reporting another sharp drop in restaurant traffic. Two tier economy.
The freight market is cooking. Volumes are up 3% YoY and the highest levels since June 2024 and tender rejections are surging to 13.78%.
German 30y yield climbs to highest since 2011
Glencore agrees to sell 40% stake on its two African copper and cobalt businesses to a US government-backed group as Washington continues to seek more control over critical minerals. The deal values the 100% of the mines at $9 billion, including debt. $GLEN
Private credit falling hard, heavily invested in SAAS. As a group, the stocks of Blackstone, KKR, Apollo and Carlyle are down 23% since November 2024. For years, private equity stocks moved arm-in-arm with the S&P 500. If private equity is struggling, public stocks should pay attention. (Chart 2, Software ETF vs Nasdaq composite, Bloomberg)
Americans own more stocks than ever: US household allocation to equities as a % of financial assets is up to a record 47.1%. This percentage has surged +16.6 points since the 2020 pandemic low. Since 2008, allocation to stocks by Americans has risen +142%.
Bitcoin sits on the edge of a cliff, key support $76,600. (Chart 3, Bloomberg)
Data today: EZ, UK, US Canada PMIs, EZ & UK inflation, US ADP.
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