1. Shifting energy supply.

Diversifying energy supply away from the Middle East and investing in domestic production, storage and renewables is the most sustainable policy response to the current energy price shock.
Oil consumption has been going down for 25 years and will continue to do so, despite the “dramatic” headlines.

It’s not the seventies oil crisis and the real commodity is chips….

The “AI supply line” is fine.

2. Luxury revival is paused.

“People became interested in luxury again at the beginning of the year,” says Christina Carlsten, a senior fund manager at Banque Piguet Galland.
Solid US Christmas spending and a pickup among Chinese shoppers in the Lunar New Year holiday had brightened the mood.
But this is a sector that doesn’t like wars. Especially because everyone was saying that Dubai and the Middle East were the bright spot for luxury.”

3. Oracle jumps on upbeat AI outlook.

The enterprise software giant exceeded expectations for the third quarter, as massive demand for AI training infrastructure fueled a record surge in backlog and cloud bookings. Traders were worried about constant headlines about Oracle’s massive spend in the AI craze. The stock had been down nearly 30% this year.
However, Oracle is trying to finance its AI buildout while already carrying a reputation as the most leveraged among the major tech platforms.
Free cash flow flipped to negative $25 billion in the trailing 12 months (TTM), with $11 billion used in Q3 alone. What could possibly go wrong?

Below: Net debt: $114 billion (over 4x net leverage based on $28 billion EBITDA TTM).

4. Rheinmetall’s industrial bottlenecks.

Rheinmetall expects sales to jump by as much as 45% this year as Europe continues to rearm and the German arms maker broadens its air-defense portfolio to meet growing demand for systems to counter drone attacks.
The company's backlog reached a record level of 63.8 billion euros, up 36% on year.
Louis Knight, an analyst at Third Bridge, said Rheinmetall operates in a high-demand industry, but there are doubts surrounding how quickly the arms maker can scale up its industrial base to meet it.
European defense growth ambitions, including a goal to increase battle tank production rates to hundreds of units per year from tens per year, could face multiyear delays, he warned.
These delays could be caused by bottlenecks such as testing and certification sites for ballistic steel, a lack of experienced technologists, and lead times on specialized tooling and machinery of up to two years, Knight said.

Below: Industry executives say the pivot toward a European self-sufficient defense industry is well under way.

5. Goldman’s trading desk sees potential for ‘extreme’ rally in stocks.

Hedge fund positioning across US equities has created a setup for stocks to rip higher after their recent wobble, as their “macro” short exposure now stands at the highest level since September 2022, data from the bank’s prime brokerage team show.
The dynamic reflects a market grappling with uncertainty stemming from the Iran war, as well as credit fears and worries over artificial intelligence. It could also, however, fuel outsized gains if good news pushes investors to unwind those hedges, according to John Flood, Goldman’s head of Americas equities execution services and partner.
“If we were to get a headline declaring the conflict over, you could see a sharp move higher at the index level.”

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