A (3:59)

All right, and what's been the story in Asia overnight and this morning?

B (4:03)

Well, following on from the Kospi, hitting a new all time high yesterday that was boosted by Samsung and SK Hynix, it's been Japan's turn to see a tech fueled rally this morning. So the technology focused investment giant Softbank, well that rallied 13%. SoftBank's gains amplified by its close ties to ARM and the artificial intelligence firm OpenAI. We also saw Advantest and Tokyo Electron rallying nearly 8 and over 9% on AI driven semiconductor optimism. So the Nikkei surged to a record high after Japan opened again after its extended Golden Week holidays, up almost 6%, Cosby's up 2% today. And China's indices are also all in the green.

A (4:45)

All right, and just finally then, what should we be looking out for in the day ahead? Benedet?

B (4:49)

Well, in Europe a key event is the UK's local elections. You might ask why should markets care? But the Labour Party are expected to do very badly in these and that's raised speculation that we might see a challenge to the Prime Minister, Sir Keir Starmer. Any new Labour leader would face pressure to ease fiscal rules and therefore would have to raise gilt issuance and that's pushing gilt Yields higher. Elsewhere in the US we're going to get Q1 non farm productivity, March construction spending and the New York Fed inflation expectations for April. And just back in Europe, we've got UK and German April construction PMIs, the French March trade balance and Eurozone March retail sales. And finally, looking at the screens futures suggests that the positive mood from yesterday is going to transfer into today's trading session. Helen, that's it from me.

A (5:37)

Very good. Thank you very much, Bernadette, for the great roundup this morning.

B (5:41)

Thank you.

A (5:45)

And now onto you, Norbert. Good morning.

C (5:47)

Firstly, Good morning, Helen.

A (5:49)

Now, oil prices were down meaningfully yesterday, briefly dipping below $100. Your thoughts on this, Norbert?

C (5:58)

Yeah, that's really the perception that the deal might be eventually coming. But you know, there's been lots of back and forth and twists and turns, especially over the past days, over the past week. But we are really possibly looking at the inherent underlying shifts with regards to talks and negotiation. And there are anecdotes that China in fact shows a greater engagement in the conflict. There's also anecdotes that their foreign minister was in Iran in Tehran earlier this week. This might be all in the context of this upcoming Trump XI meeting. So overall, these developments and if they're confirmed, could match some of our earlier thinking about possible pathways going forward that you see broader diplomatic engagement because this crisis is really no one's interest. But let's see how things evolve over the coming days.

A (6:44)

You often talk about the breathing room in the oil market and that this contains any imminent supply risks. Can you talk about this perhaps in a bit more detail?

C (6:54)

Sure. Well, the oil market really moved past this initial shock reaction where there was lots of uncertainty, whereas really things unsettled. This was largely the period of March and then into maybe early April. Now we in a kind of a different regime where we see how this supply shock and this trade basically impasse around Hormuz is primarily absorbed by the inventory draws. But if you look at how storage is declining and finally we have the data from North America, we also getting now from Asia, so we have more clarity on how this shock is really impacting the oil market. We see that these storage draws are just happening at a slightly slower pace and that means there's really breathing room for the oil market to absorb the supply shock. Where does this come from? Well, our best guess is that the deficit that is in the oil market, so the gap between how much oil is being consumed and how much oil is being produced and supplied is slightly lower. So this explains really that you have this lower speed that you're running down your storage. But this storage is quite high, it's elevated. You have lots of strategic storage which is making in the into the market. You have lots of commercial storage. So this alongside with the trade replaying the trade rerouting really should basically prevent any kind of inman supply risks.

A (8:14)

Okay, what are the key things we need to think about then in terms of this temporary resilience?

C (8:20)

Well there's the alternative routes, the export routes of the Middle east, we often talked about that. So the Saudi Arabia's ability to ship by the Red Sea or the Emirates ability to directly ship into the Gulf of Oman. But there's really lots of smaller elements that all add up and basically also provide this breathing room. We have the oil boom in South America and especially there's quite a bounce in exports out of Venezuela. It's small but nevertheless overall it matters. You have ample supplies in North America, especially in a product sides. I'm sure that some of the ships loaded with jet fuel kerosene are on the way already made the way to Europe and you have lots of natural gas liquid supplies. This is a very specific small market but it's one that feeds into plastics production and combined with China's kind of great petrochemical feedstock flexibility this is really something that helps on the plastic side and the petrochemical side. And then last but not least, there's really there are substantial government stocks namely in Japan and this has been an element too that really provided some of the fuel supply security in Asia for the time being.

A (9:29)

A crisis like this can sometimes bring lasting shifts in the market. Are you seeing anything there Norbert, in terms of lasting changes we might see?

C (9:38)

Yeah, I think it's very important to really look beyond the current geopolitics and especially if our thesis holds that we're in a kind of a nevertheless temporary but very intense shock because I think these shifts, that's what matters ultimately for investors in the long term. And there's some that we think we can spot. So peak oil demand moved closer because road electrification has accelerated. There's ever more evidence for that. It's not only about autos, it's also about trucks. Then the United Arab Emirates, they left the oil cartel which means in that oil market and the Emirates are a big producer, there's more flexibility for them, they're less constrained, they continue to ramp up investments. Which means this bodes really to our thesis that you looking at eventually the well supplied market with greater competition then Iraq decided to accelerate building a pipeline that links its southern field to the Mediterranean. That's a key change. And if you look at that specific project, and if you look at the alternative routes that we have today, maybe some years from now, the straight hormones is really no longer such a big threat that the oil market could well survive another potential blockade of straight hormones if you have such kinds of resilience investment. But to wrap it up, our views aren't changed. We believe that you're in this kind of historic pattern of a short lived but intense price shock. And we still stick to the view that we like to see some downside. Great downside for oil later this year, basically heading into summer or past summer. That's it from the oil market.

A (11:12)

Excellent. Thank you Norbert. Always great to get your latest thoughts.

C (11:16)

Thanks for having me.

A (11:17)

So that's it for today. Thank you again to Bernadette and Norbert and to you, our listeners, for tuning in. I hope you enjoyed the show. If you did, then make sure you subscribe if you haven't already. And please join us again to tomorrow when I'll be back with more of my colleagues to talk about what is moving markets. Until then, they have a great day everyone, and bye for now. The information and opinions expressed in this podcast constitute marketing material and are not the result of independent financial or investment research. Please refer to refer to www.juliusbear.com legal podcasts for further other important legal information.