James Brodie
Head of Learning & Development, Flux
US Strikes Iran, KOSPI Breaks Support, Chinese Real Estate Collapses
US strikes Iran; Brent +6%, stocks fall, yields and USD rise, while AI and broader market fragility remain in focus.
So 17 minutes after the NYSE closes the U.S. strikes 80 targets in Iran, strikes were 4 to 5 times larger than the round 10 days ago, per a U.S. official.
With Brent up 6% from Friday’s close we see the usual rotation in this US-Ian repeating cycle,: equities lower (S&P futures -0.8%, Nasdaq -2.1%), yields higher (2-year & 10-year both 8bp higher), precious metals lower (gold -1.4% & silver -2.7%) and the dollar higher. Over 50% of Nasdaq stocks are now in a bear market but until the Nasdaq composite breaks 25,000 longs will remain bullish. (Nasdaq, Bloomberg)
Stocks are the most expensive ever, but trade the price, not the bearish narrative! (Bloomberg)
Elsewhere the Kospi has broken support (officially a bear market!) down another 5.4% today after more circuit breakers (Bloomberg), and Japanese yields continue higher with 10’s up another 3bp (highest since 1996).
AI compute prices remain weak just as data centre providers - already deeply unprofitable even at peak pricing - face pressure on margins, forcing a shift from subsidized subscriptions to token-based billing that reveals LLMs cost 10-20x more than customers were told. The IPO push from SpaceX, Anthropic, and OpenAI as a sign these companies are racing ahead of a coming double hit of falling demand and shrinking margins. (Ornn H100 Compute costs. Bloomberg)
- Record Stock Concentration is not a healthy market. With market concentration so high and everybody in the same trades, the likelihood is greater that a significant drawdown will lead to a curbing of risk limits and further deleveraging. Banks would act as an accelerant as they supply a record amount of equity leverage to the market (to leveraged ETFs, for instance). (Bloomberg)
Amazon Sells Another $25BN Bonds As Goldman Urges Clients To Start Hedging AI Debt Bubble (Bloomberg)
Striking chart from the Chinese real estate market, showing that prices have collapsed to multi-decade lows. (Koyfin charts)
Arabica coffee futures surged as much as 19% on Monday, the steepest one-day rise in 26 years, as El Niño-related weather concerns extended a one-month rally that has lifted prices by 45%.
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Settlement Week
We saw 980kb and 450kb of net buying in the Sep'26 and Oct'26 LST/FEI arb this week, respectively, although players remain out of the money.
17 page report