Subscribe to receive these charts every morning!

1. “Recent crises in the region have shown that the impact on equities from oil shocks tend to be short lived, and usually end up as medium-term buying opportunities”

In fact, following the recent retracement, Europe is close to being oversold, implying that another leg lower would probably trigger some dip-buying.

2. Pimco sees a small risk of stagflation in the US in the coming months.

Richard Clarida, global economic adviser at Pimco and former vice chair of the Federal Reserve, discusses the inflation situation in the US. “If we do get stagflation, it’s not going to be the bad old days of the Seventies,” Clarida tells Bloomberg’s Francine Lacqua. “We’ll have a whiff, potentially a whiff, of stagflation.” Inflation figures so far have been “better-than-expected,” while jobs data has been a “pleasant surprise,” he adds.

3. Make uranium great again.

President Trump signed four executive orders aimed at accelerating the US nuclear build out, including a 400 GW nuclear capacity target by 2050, a four-fold increase from the 100GW currently running.

This adds to the prior goal set by >20 countries at COP28 in 2023 to triple capacity by 2050. The measures also call for 5 GW of power uprating at existing capacity (equivalent to around 900 tonnes of uranium demand, or 1% of 2030 demand), 10 new large reactors to be under construction by 2030, and a directive to reduce deadlines on reactor approvals to 18 months. It also calls for a plan to expand domestic uranium conversion and enrichment capabilities.

The US' 2050 ambition would imply a 24% bigger nuclear reactor pipeline than China has currently.

To achieve this, the US will need to start constructing 20 average-sized reactors each year to 2040, 4x faster than China in recent years.

4. A new world order is redirecting capital from the U.S. toward Europe, says Goldman Sachs' former commodity chief.

“The global framework set in place at the end of World War II is being dismantled and the U.S. is retreating from the world stage.

This will trigger a strategic shift in capital allocation, away from the high tech, "asset-light" sectors of the U.S. in favor of the "asset-heavy" defense and infrastructure sectors in Europe. “ This is the opinion of Jeff Currie, chief strategy officer of Energy Pathways at Carlyle Group, who argues that "desperation is the mother of innovation."

Europe's response to its security concerns with a huge buildup in military spending financed by the release of the German debt brake will attract capital and create an investment boom, he believes.

The U.S. meanwhile will need to figure out who is going to buy its debt. "And as the U.S. retreats, it brings all of these into play, and I like to call it bonds, barrels and bombs. The bonds of the dollar, the barrels are the oil, and the bombs are the U.S .military, all three of these are under pressure," he writes.

Whereas AI capital expenditure in the U.S. since the launch of ChatGPT in November 2022 has totaled $500 billion, Europe has already announced EUR1.5 trillion in new defense-related spending and over that time frame the German DAX DAX has outperformed the S&P 500 SPX by 20%, observed Currie. Contemplating the decline in the dollar and sentiment toward it, Currie points out that in the last decade European capital has flooded into the U.S. supporting the country's tech investment and funding its deficit. Reversing that investment trend is key to Europe's financing needs.

Currie concludes that "Europe's bond markets are signaling a confidence in its domestic affairs that was historically only reserved for America. “

Here is the historical comparison between 10 year yields for the US and Europe.

5. “Feelings are temporary but Birkins are forever.”

Chanel is discovering that it’s hard going toe-to-toe with the Hermès Birkin bag. The wish to mimic the Birkin is understandable, as the bag is a gold mine for Hermès. The brand limits how many it produces, so demand far outstrips supply.

As Hermès passed on the full effect of President Trump’s tariffs to customers in May, Chanel has held prices steady for now and may have to swallow the new import levies as the brand’s sales are weak in the U.S.

The lesson for other luxury brands is that cult products need to be scarce rather than stunningly expensive.

Source: WSJ

Not a subscriber yet?